Futures Group

The term ‘internets’ was a signal how Bush didn’t ‘get it’ in the early years of this decade. But after watching this video, do you know think there is some merit to terming Asia’s Internet(s)?

I think the first para says it well. “But while we believe the greatest danger is past, we also recognise the price of our salvation has yet to be paid in full.” SocGen’s view on how public debt will swing recovery (or not) in the next five years.

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.

The Asian Development Bank has commissioned a study on what the possible trajectory that India might take if it achieves true affluence in thirty years India 2039: An affluent society in one generation. Download it here.

How does India avoid falling into the middle income trap, where Malaysia, Thailand and other previous roaring economies are still in? How does India sustain growth near 10% over 30 years, putting in place policies that span the lifetime of several governments? How does India move into making cities their engine of growth, instead of bleeding them to sustain the countryside? And so on.. lots of good questions that have been asked on the sustainability of India’s growth, now all in one report.

Fantastic use of media to illustrate the crisis, especially the moving charts on section III. From Council of Foreign Relations, click here. h/t to FJ.

Nassim Taleb on the real evil of the current crisis …. too much debt, the article here deserves to be read in full.

Some quotables “Bubbles and fads are part of cultural life. We need to do the opposite to what Mr Greenspan did: make the economy’s structure more robust to bubbles.” and “the complexity created by globalisation and the internet causes economic and business values (such as company revenues, commodity prices or unemployment) to experience more extreme variations than ever before. Add to that the proliferation of systems that run more smoothly than before, but experience rare, but violent blow-ups.”

The imbalances from Chimerica that led to the current crisis have not really been solved, just papered over with lots of hot money/stimulus. The ‘rise of the rest’ continues as the west is propped up for now, but are they able to withstand the violent blow-ups that are to come? Resilience is an overused word, but it bears repeating that in wounded beast scenario, how does Singapore cream the top of the globalisation wave, while dampening the lows? Specifically, are our social systems strong enough to handle the more extreme ups and downs to come?

Last quote “Asking the economics establishment for guidance (particularly after its failure to see the risk in the economy) is akin to asking to be led by the blind – instead we need to rebuild the world to make it resistant to the economist’s mystifications.”

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.