Futures Group

Late last year, Futures Group did a video presentation – “Rise of the Rest”. So we reckon that if the Future lies here in Asia, wouldn’t it be interesting to learn and understand how Enterprises in Asia, especially those in China, India and even Indonesia, are evolving? How different are these Enterprises today as compared to 10-20 years ago and what they will look like moving forward?

Hence in May this year, we embarked on the first leg of our Future of Enterprise project focusing on Chinese Enterprise, and here’s the slides on some of the trends observed.

Note: This is a synthesis of ideas from more than 100 people (Including business leaders, academia, entrepreneurs, bloggers, etc. in both Singapore and China) interviewed over the past 3 -4 months.

Chinese enterprises have long enjoyed a low-cost structure, and after decades of being labeled “Factory of the World”, the Chinese understood that apart from manufacturing and/ or producing copies/ imitations, they would have to innovate in order to differentiate themselves from the competition. In addition, we also learnt that it is not always about product innovation, but the ability to adapt foreign ideas or create new hybrids to fit local context as well as the ability to monetize it (Example of Facebook Vs QQ). Another key observation is the need to understand State Policies – We learnt how state policies can affect and even create new industries in China (example of One Child Policy and its impact on education, healthcare and internet industry as well as removal of licensing requirement which led to the boom in Shenzhen’s cottage phone industry).

As China prepares herself to be a dominant force in the global economy, what are the opportunities and threats faced by Singapore and our enterprises? Well, something to mull over while we continue phase II of our project – India. Here We Come!

We just returned from a fruitful trip to Korea, lots that we’ve learnt there, but up front sticking in my mind are East Asia’s online hermit kingdoms. These are the QQs, Navers, Mixis etc that have shown new ways or organising, socialising and monetising networks that facebook, myspace etc have not. We are thinking of doing some animation to highlight these kingdoms, but for now, there’s a very useful slideshare below from Benjamin Joffe of pluseightstar, who was also at LIFT Asia presenting on a similar topic.

Will Chimerica end in a divorce? Will the USA be a shadow of its former self?

Niall Ferguson, who co-invented the term Chimerica, asks what the post-Chimerica world might look like in 2013 in the latest HBR issue (full article below). He starts with the US in crisis (high public debt, digesting toxic assets, who wants to buy US bonds?) and then moves on to the economic marriage between the USA and China. Chimerica could end in a divorce if China relies less on exports for growth, resulting in a shift in the balance of power. Yet US global economic power is not undermined as there is no real alternative to the US dollar. Ferguson reiterates a point he made before, that the global economy’s breakdown hurts other nations more than the US. Other countries, including China, will be more weakened by comparison with the collapse in world trade and industrial production. This results in a world of low US growth, and lower growth for other emerging nations. What Pimco has termed ‘the new normal’.

The economic crisis will spill over into politics. In this crisis, US allies (East Asian exporters, newly democratic Eastern Europe) have been hurt more than US rivals. We see new outbreaks of instability in emerging markets that previously looked stable, such as Thailand and Ukraine. The world’s increasing instability reinforces the US as a safe haven. But the US may not want to be global policeman much more, and both new and old unstable spots are left to fester.

It is in this world that Ferguson revisits 2013. It is an assymetric world where everywhere else seems more dangerous and unpredictable than America, where the actual consequences of the crisis are less terrible. The USA’s financial power has been diminished, but its economic power is still stronger than all others.

Power after all, is relative.

Paul Romer spoke at TEDGlobal on his new idea of ‘charter cities’. Charter cities are catalysts for economic development as they are the appropriate arena for new ideas (villages are too small and nations are too big). Economic development not only involves technologies (a main emphasis of Romer’s theories); it also involves rules. Charter cities are the ‘greenfield’ sites where new rules are implemented. As they succeed, cities nearby will become influenced and development will spread. Just as Hong Kong was a charter city which influenced Shenzhen and other cities,  Romer proposes charter cities in Guantanamo Bay, Cuba (calling Canada to take a partnership there) and throughout Africa.  Singapore’s experience complements Romer’s theory perfectly. I caught his attention with the idea of a TEDxCharter Cities to take these ideas further and encourage bottom-up discussion about the concept and its application. Something to think about…?

Found this through our horizon scanning colleagues, a book by ANU on China’s new place in a world lurching from crisis to crisis. Makes me think of the unfinished conversations we are having on a China-centered Asia (ChiAsia) and the different flows and how the hell Singapore should be placed on these new flows. Anyway, here’s a brief grab on what the book is about:

The world and China’s place in it have been transformed over the past year. The pressures for change have come from the most severe global financial crisis ever. The crisis has accelerated China’s emergence as a great power. But China and its global partners have yet to think or work through the consequences of its new position for the governance of world affairs. China’s New Place in a World in Crisis discusses and provides in-depth analysis of the following questions. How have China’s growth prospects been affected by the global crisis? How will the crisis and China’s response to it impact China’s major domestic issues, such as industrialisation, urbanisation and the reform of the state-owned sector of the economy? How will the crisis and the international community’s response to it affect the rapidly emerging new international order? What will be China’s, and other major developing countries’, new role? Can China and the world find a way of breaking the nexus between economic growth and environmental sustainability — especially on the issue of climate change?

You can download the entire book here.

The real constraints to growth in Asia may not be ”excessive’ domestic savings per se, but the weakness in financial systems and the related legal and regulatory structure, which cannot efficiently transform savings into loans for education, housing, and private investment and pool social risks through financial instruments such as insurance covering medical care, pensions, and unemployment.

The growth of competitive domestic private banks should be the most important and efficient solution for China’s switch to a new growth engine. The rebalancing progress away from the export-model, however, will not likely be fast or smooth. There is persistent resistance from many vested interest groups which benefit from the old growth model, thus pushing to preserve the status quo. This will take longer than we like, but faster than we think. Patience is a virtue.

James Fallows of Atlantic Monthly at the Aspen Ideas Conference right now, from his blog a snippet on the US not leading at any of the green technology fields.

On energy, a disturbing factlet. (And obviously not the only disturbing observation on the energy-and-climate front.) I heard three people separately observe that when it comes to future sources of “clean” energy, there is not a single field in which U.S. companies are the technical or market leaders. One person gave an informal ranking of the leaders this way:
Solar-powered electricity (ie, photo-voltaic systems): Norway, Japan, China
Solar-thermal systems (for heating water or buildings) Spain the leader in getting systems deployed
Wind power: Holland, Denmark, China
Geothermal power: nobody
Nuclear power (“clean” in the carbon-footprint sense): France, Japan
CCS, “Carbon capture and sequestration” (stripping out CO2 and burying it): Norway, Australia, Canada.

This person said that his list was rough and ready, and that US firms were in a close second place in some fields. But the main point, he said, is that “American firms are acting as if there is not going to be a vital, profitable, globalized clean-tech industry a decade from now, and as if they don’t care about competing in it.” He had some other more hopeful things to say about how sustained investment could help close the gap. But the list itself was news to me.

And from their latest piece here, excellent read on the elusive green economy. Clean energy, like other utilities, will be succeed or fall with consistent government support/inaction. China is now one of the largest players in clean technology because of government support. So is Germany’s solar play. Unlike Internet start-ups with lower funding costs, energy plays require much larger funds to starup that most VCs cannot afford. Government grants are needed, but that would mean choosing winners. Technology, policy and finance will intertwine, who knows when the breakthrough green tech will emerge from this interplay?

The Chinese have realised that inaction on climate change will lead to their own economic undoing. And they are taking action. This is a comprehensive look at everything China is doing to green itself. h/t to Phei Sunn for sending this around.

The full article can be downloaded here. The focus is on energy efficiency, renewable energy, energy grid, auto industry, public transport and others.

Met up with Ian Bremmer of Eurasia. Some notes below.

- Not a unipolar world, nor a bipolar world, but a non polar world. Absence of global leadership in critical issues e.g. climate change that will fester and stagnate. Such issues are unfixable in the absence of a shock to the system, which triggers a reaction to patch it up. Arguably, the accumulation of imbalances in Chimerica was such as issue, allowed to fester until septic shock set in.

- Globalisation increasingly challenged by state capitalism/SWFs. Not so much deglobalisation, but a mixing of public sector/market. The G20 is a menagerie worse than herding cats, because there are some animals in the menagerie that hate cats, and there’ll be more flareups between nations. Ian wrote an article in Foreign Affairs on the four waves of state capitalism in ‘State Capitalism comes of Age‘, worth a good read.

- The China-US relatonship will move from collaboration to intense competition. The US will bear the bulk of the world’s geo-political burden (Afghanistan, Pakistan …) while China will bear the bulk of the world’s geo-economic burden (developing domestic market in switch away from G3 exports).  I know Thomas PM Barnett talks often the need for the USA us this as a basis to form a grand bargain with China on this, while prodding China to take on more geo-pol burdens, but … but the military guys don’t talk to the economic guys within their government.

McKinsey’s article ‘China’s green opportunity’ identifies five major categories of energy efficiency and greenhouse gas–abatement opportunities that China could implement between now and 2030. If China pursued them successfully, it could reduce its dependence on imported oil by up to 30 percent more than the 30 percent reduction it currently hopes to achieve. The country could also stabilize coal demand at current levels, substantially reducing the proportion of electric power generated by using this fossil fuel, to 34 percent by 2030, down from 80 percent today. These efforts could enable China to hold its greenhouse gas emissions to roughly eight gigatons by 2030—roughly 10 percent higher than 2005 levels—without hindering growth. This would amount to nothing less than a green revolution in China.

The five categories are green power, green transport, green industry, green buildings and green ecosystem. Go to the full article here for details.