Saturday, 11 July 2015

Look at the size of the world productive economy now and in just 5 years time

World nominal GDP 2015

Projected world nominal GDP 2020

By 2025, the consuming class will swell to 4.2 billion people, with annual consumption in emerging markets of $30 trillion; the biggest growth opportunity in the history of world economics

World consumer spending 2014

World consumer spending 2025

There is no excuse under these numbers for you not to create GigaMarkets
The world is interconnecting exponentially
Breakthroughs in technology thought impossible 10 years ago are now in your recycle-bin
African entrepreneurs are now your competition
More than 25 percent of households in Saudi Arabia, Turkey, Iran, Russia and Malaysia will command incomes above $50,000 a year by 2025
 By 2030 around 80 percent of consumers will live outside the US and Europe


World population by 2030, 87 percent of growth from now on in Asia

Thursday, 9 July 2015

An Interconnected Economy Worldview

The frequent downbeat economic news we all hear, is hounding business leaders and entrepreneurs into a kind of submission that the enormous challenges ahead have few answers. 

      Prophecies about continued heavy international debt, trade imbalance, snail-like market growth, unstable currencies and slow employment gain must give one hell of migraine. And please do not misunderstand me; we can fully count on more unexpected flare-ups and discontinuities that will ill-inform our instincts to pack-up shop.

Only, the big interconnected picture is quite different; since beyond the glum newscast headlines of macroeconomic inertia and viscous microeconomic activity, there are unsung markets, industries, geographic regions and nation-states that are not only growing, but energizing their economies for yet more growth. There are thrilling opportunities in emerging markets, even amazing prospects in mature markets where hack commentators see no light.

I will highlight and examine many first-class endeavours and achievements taking place in and between continents and sovereign-states. Intercontinental alliances, union initiatives and joint strategic ambitions that are unprecedented. All of this in the face of ostensibly restrained                                                   economic growth and ambiguity.

GigaFacts by the Trends.

Whilst much of Rome is ablaze, personal wealth, enterprise revenue and national GDP has grown in specific global neighbourhoods. Continental regions, nation-states, megacities, even independent households that have experienced a boom in both wealth creation and value appreciation in recent years. Parts of the world that that are right smack bang in front of your eyes. All it takes is to open them and look!
Here is a short eye-opening inventory of economic trends and commentary that act as a wind-vein for strategic decision making. And it is true, if you refer back to this account in years to come, that the figures will have moved on, but the integral patterns of such meta-economic trends will be cogent:

·    The big fat fact: The World Bank reports that the productive financial wealth (the nominal GDP) of the world grew from $31.4 trillion in 2000 to ~$78 trillion by end of 2014. Representing ~135 percent aggregate growth over that period!

·  The future global economy is estimated to grow by an average ~3.6 percent annual productivity rate, resulting in world nominal GDP swelling to ~$90 trillion by 2020; ~16 percent larger than it is today according to Bain & Company’s much acclaimed ‘8 trillion trends report .’

·      ‘By 2025, more than half of the world’s population - 4.2 billion people - will have joined the consuming classes, driving annual consumption in emerging markets to $30 trillion...’ That is, well over half the world’s consumption will occur within emerging economies, claims McKinsey’s energizing report, Winning the $30 trillion decathlon: Going for gold in emerging markets.

·     By 2020, China is expected to be the world’s largest economy. With a nominal GDP of $7.3 trillion in 2012 to an estimated $24 trillion in 2020 (this median estimate diverges with the array of available institutional projections from the likes of The World bank, IMF, UN, etc. In fact, Hu Angang, dean of the Institute for Contemporary China Studies, says China will become the largest economy in terms of PPP GDP by 2017; and by 2027 in terms of market exchange rates.

·    Over the past 20 years, China has seen its GDP increase 16 times over, and its share of global manufacturing industry go from 2.9 percent to a colossal 20 percent. It moved from being the 10th largest economy in the world to the 2nd largest, lifting 500 million people out of poverty (World Competitiveness Yearbook).

·      In 2010 China had 18 million households with an annual income of above $16,000. By 2020 this number is expected to be 167 million households. (McKinsey Institute report, March 2012).

·    GDP of emerging and developing economies accounted for 36 percent global GDP in 2012. Global emerging nation’s relative middle-class now stands at ~2 billion people, collectively spending $6.9-trillion a year. Over a billion new consumers will join the global marketplace by 2015. Spending is expected to rise to $20 trillion by 2020. Twice current US consumption (McKinsey report, July 2010).

·     Developing economies have accounted for nearly 70 percent of world growth over the past five years. The GDP of emerging economies accounted for 20 percent of world GDP in 2000, 34 percent in 2010, and an estimated 39 percent by end of 2015, according to the IMF report, 2010.

·   By 2020, many emerging countries will see more than 80 percent of their population with annual disposable incomes in excess of $10,000. More than 25 percent of households in Saudi Arabia, Turkey, Argentina, Iran, Russia and Malaysia will command incomes above $50,000 a year (Roland Berger 8 Billion fifth report).

·     Russia could overtake Germany to become the largest European economy before 2020 in PPP terms and by around 2035 at market exchange rates. Emerging economies such as Mexico and Indonesia could be larger than the UK and France by 2050, and Turkey larger than Italy.

·   Vietnam, Malaysia and Nigeria all have strong long-term growth potential, while you may be surprised that Poland should comfortably outpace the large Western European economies for the next couple of decades, according to PwC’s ‘World in 2050’ report.

·   By 2030, an approximate 66 percent of the world's middle-class will live in Asia, compared to just 21 percent in Europe and the United States.

·      Brazil, Russia, India and China’s share of global GDP was 8 percent in 2000; a decade later that share increased to 25 percent (CME Group, Market Insight July 2012). India is forecast to be close to 90 percent the size of US GDP in 2025.

·  Global R&D spending hit more than $1.4 trillion in 2012, up ~5.5 percent from 2011. However, the global R&D landscape is shifting both south and east according to a Roland Berger Strategy Consultants report ‘Global topic 8 billion.’ ‘Emerging markets are advancing from production sites and work benches to become important innovation hubs. Many emerging countries have not only increased R&D investments but also moved up the global innovator league tables.’ R&D spending will clearly rise as emerging economies grow; however, China, India and Brazil already rank among the Top 20 of Forbes R&D table.

·     A quite astounding number of new billionaires in the world grew from 441 in 1987 to a record 1,396 billionaires in May 2013. The combined net worth of the GigaRich is $5.429-trillion. There were almost as many not so billionaire club members who lost wealth (441) as those who gained (460). 180 held steady and 128 new ( began the authoritative pursuit of the world’s billionaires 25 years ago).

·     The combined wealth of the world’s millionaires increased by 10 percent in 2012 to $46.2 trillion. This is more than three times the annual economic output in the US.

·   1 Nuevo-millionaire being born at a rate of one every 30 seconds; or on the order of one million new millionaires in the making in 2012.

·  175,000 of those new millionaires listed in Boston Consulting Group's (BCG) 2012 Wealth Report come from Asian economies. As the Eurozone plunged into crisis and unemployment soared across the globe, 175,000 Asian people still made enough cash last year to join the global millionaires' club.

·   The new entrants, mostly from China and India, bring the number of millionaire households across the world to 12.6 million, according to the BCG report. The US still boasts the most millionaires with 5.13 million households in the top bracket, despite a fall of 129,000. China, which added 193,000 to 1.4 million, is within touching distance of Japan, which is in second place with 1.58 million. Britain is in fourth place with 411,000 millionaires.

·    The largest number of High Net Worth Individuals (HNWIs) who lived in Asia in 2012, grew by 1.6 percent to 3.37 million households. US HNWI population is 3.35 million households. However, US remained the largest region of aggregate HNWI wealth at $11.4 trillion. And $10.7 trillion in the Asia (Google 16th annual World Wealth Report).

·  As economies mature they exhibit a turndown in the production of new consumers. Conversely, emerging nations overtly generate new-found consumers at a blistering pace. ‘The Next 4 Billion’ a new buzz term for the fact that 4 out of 7 billion consumers reside in India, China, Indonesia and parts of Africa and Latin America (E4-B-C Brands anyone?).

·   There are 2.3 billion emerging nation consumers that lay between mature middle income and lower income segment. By 2021, global value is expected to exceed $6-trillion, and in India alone $1-trillion (PwC’s report ‘Profitable growth strategies for the Global Emerging Middle: Learning from the ‘Next 4 Billion.’

·    Leading companies emanating from mature markets earn merely ~17 percent of revenues from emerging markets, even though these markets represent ~36 percent of global GDP.

·    Asia holds ~60 percent of the world’s population, at 4.2 billion people, living in 46 different states (6 more states lay partly in Asia, but economically and politically considered another region).

·   The sources of economic growth will tilt increasingly toward emerging economies. Whereas the advanced economies currently generate two-thirds of global GDP, developing and emerging economies will contribute an outsized share of the growth in the future. By 2020, the advanced economies proportion of world GDP will drop to 58 percent, a sizable change over relatively short period (Bain & Company report 8 trillion trends).

·    0.266 new babies per second!? Even though birth rates have fallen since the mid 20th century, at present, global, yearly births sits at 140 million versus 57 million deaths, resulting in a net growth of 83 million people per annum. That is the equivalent of the aggregate population of all of London, Tokyo, Beijing, Shanghia, Guangzhou, Mexico City, and San Palo being born in as little as 365 days; or ~23 thousand a day; or 1 newborn sweetie ever 4 seconds! Interestingly, nearly all of it originating in developing and emerging economies, who will shunt-up and account for about one-quarter of the rise in GDP by 2020. And by ~2050, there will be ~10 billion people on this plant.

·    600 cities today generate 60 percent of the world’s nominal GDP. Sao Paulo makes up 13 percent of Brazil’s total GDP. Moscow 18, Shanghai 12, Johannesburg 20 percent respectively, contributing to their nations total GDP. By 2025 136 new cities will emerge in the developing world, one-hundred of which will be in China contributing $24 trillion or 26 percent of $91 trillion global nominal GDP.

·    In 2012, a quarter of total commercial trade happened across borders. By 2020 almost a half of world trade will be racing across borders. By then, 70 percent of the activity will be in Asia and Latin America. However, by year 2030, 70 percent of world trade will be shipped or zipped across territorial lines every year; or half a $ trillion a day; or 48.6 million dollars every second rocketing in multigeographic directions. Again most of it in Asia!

·   An influx of oligarchs and other wealthy foreigners enabled the UK to boast the second highest number of Ultra-HNWI individuals, with 1,125 households holding financial assets in excess of $100 billion (£65b)

·    One in 25,000 UK households is now worth more than $100 million, says BCG's report, which does not include property and other non-financial assets. If property were included, the number of UK millionaire and super-millionaire households would dramatically increase.

·    Amazingly 17.1 percent of Singapore households are worth more than $1 million, while 1100 out of 100,000 households in Switzerland are worth $100 million or more.

·    And to end the beginning of the statistical trends. The world's richest people are also getting richer faster than everyone else. While the world's total privately held wealth (again not the same as GDP) increased by 1.8 percent to $122.8 trillion in 2012, UHNWs' wealth increased by 3.6 percent to $7.1 trillion. The BCG report predicts that UNHWs' wealth will rise to $10.3 trillion, or 6.8 percent of the world's total wealth, by 2016.

Well, as is clear, whilst some of Rome is in flames, wealth has and is growing in specific geographic quarters and proprietary households. Continental regions, nation-states, megacities, even independent households that have experienced a boom in wealth creation and appreciation in recent times. In short, both magnitude and speed of aggregate economic growth is accelerating (one of the most acute aggregate economic measures I can think of).

But please be certain, the future projections of these numbers are fungible. They are not written in stone. Governments, policymakers and the private sector wherever in the world, can put into action strategies that could temper or accelerate the numbers.

Only! You do need too seriously consider what follows: from the furthest Far East to the deepest South of the equator, global GigaMarkets are interconnecting at a pace and magnitude not seen before. Only time will tell, but as I said above, there is no time to rest on yourlaurels. 

GigaMarkets are where we must focus.

Tuesday, 7 July 2015

MENA Scorpion Economies:
A Sting in the Tale!

And there is one hell of an unexpected story, for many, here:

MENA, the acronym referring to the Middle East and North Africa region, includes 16 emerging nation-states all in a different gear; all with different problems to solve; yet all with have one thing in common: to innovate and progress their societies and cultures where each citizen may live a good quality, safe and happy life.

Considering the upheavals, hostilities, political revolutions and often dispassion between some MENA nations, you might think at this point that it going to be a while – a long while – before the regions joins the GigaMarket Olympics. But have faith; you never known what might emerge sooner rather than later

I will start with Israel; a young nation founded just over six decades ago. Back then, it was little more than a desolate country with no access to natural resources and very little agriculture; with more than half of the land arid desert. But 65 years on, the Israelis have turned their country into an oasis of discovery, technology and innovation; a strategic infrastructure development that matches world-class standards.

Back in 2010 Israel joined the growing number of advanced market economies by OECD benchmarks. And considering Israel's lack of natural resources over the last half a century, this has been achieved via Israeli ingenuity and wits.

This relatively young nation has fast developing high-end technology and service provision ranging across sophisticated electronics, advanced biomedical equipment, breakthrough genetic analysis, meta-chemicals, integrated solar-power systems, nanotechnology research, advanced software algorithms and telecommunication systems.

There are a notable number of cultural and commercial initiatives that begins to make sense of the Israeli transformation. For example, the percentage of Israelis engaged in scientific discovery; and the investment in R&D in relation to GDP, are amongst the highest in the world.

Then there is the fact that the Israeli economy is ranked as the world's most durable economy in the face of the 2008 calamity. The Bank of Israel was ranked first among central banks for its efficient functioning. In fact, it is interesting that Israel, even before the 2008 crises, had policies in place that buffered off the pressure of banks to appropriate large sums of public money; plus, decoupling the banking depository and investment banking activities!
In recent years, record figures in foreign investment totalled $13 billion. And while Israel's total external debt is ~40 percent of GDP since 2001; it has now a net lender in terms of external debt, which as of June 2012[update] stood at a significant surplus of $60 billion.

Investment in business incubators and focus on high-technology innovation has attracted much attention from the Venture Capital (VC) world. Around 70 active VC funds (14 international) have set up in Israel. Between 1991 and 2000, Israel's annual venture-capital expenditure rose nearly 60-fold, from a mere $58 million to $3.3 billion. Information-technology revenues rose from $1.6 billion to $12.5 billion in that time; setting a straight investment course for the future.

Today, Israel leads the world in the share of its growth accredited to high-tech ventures. On the order of 70 percent in fact. Recent figures show that the total VC investment in high-tech ventures alone stands at $100 billion in 2012, when many nation-states suffer shear investment hardship.

Israel has excellent trade agreements with much of the world. The European Union, United States, Turkey, Mexico, Canada, Jordan, Egypt and became the first non-Latin-American country to sign a free trade agreement with the Mercosur trade bloc.

Two-way trade between the USA and Israel totalled some $24.5 billion in 2010 alone, doubling from 1997. Israel's chief exports to America comprises of integrated circuits, printing machinery, telecoms equipment to name just a few. In regional terms, the European Union is the top destination. Israel exported goods totalling $5 billion to the EU between October 2011 and January 2012. Exports to the Far East came in at $3.1 billion at that time.

So now, to business! I find that Israel has a surprising number of innovative technological businesses considering its youth and the scenes with see on the late evening news.

One of my specialities: Rapid Manufacturing. Israeli 3D printer maker Objet, mergered with American 3D printer producer Stratasys. Now a $1.4 billion company with headquarters in Minnesota and Israel. Founded by Israeli printing engineer, the company has about 440 employees, more than half of whom work in Israel.

Next, Disk-on-Key, developed by M-Systems, a company founded by three Israelis. A digital data storage device launched back 2000; since then the little gadget is as ubiquitous worldwide as post-it notes. PC World has called the device one of the world's top 10 gadgets in the last 50 years. Now M-Systems is part of SanDisk; who seem to be very happy indeed.

PrimeSense transformed human interfacing with digital devices with haptic and gesture reconviction technologies. By seeing in 3D, control interfacing went from physical games controllers to dynamic hands free and body gesture. Today the Tel Aviv company is the leading business provider of low-cost, high-performance 3D machine vision technologies for Kinetic gaming systems.

Intel was one of the first hypernationals to land in Haifa, Israel. Constructing a chip design house in 1974. Today Intel Israel employs 7,800 people, and has its headquarters for wireless technology R&D there. The famous (if you are an engineer) ‘8088 processor Centrino’ and the ‘SandyBridge’ owe their birth right there. In 2011, Intel Israel's exports maxed at $2.2 billion.

The Java platform inside Amazon's best-selling Kindle is Jewish! Sun Computing, now part of Oracle, developed the platform to run the software in a new e-book reader. Sun handed the project on to its Israeli R&D office in Herzliya, and the rest is history. Amazon is now the undisputed leader in the e-reader category.

 And surprise, surprise! Facebook is being given a Facelift in Israel! A small firm called Shaker has invented an award-winning virtual bar application. The Facebook app recreates social experiences online, allowing people to socialize and meet around mutual friends with shared interests. Recently Shaker has raised more than $17 million in financing from investors. A now winning the prestigious Startup Battlefield contest held at TechCrunch
Disrupt USA. Take a look out for the NBA Basketball Arena Interface!

I like this one. Developed by Wizcom Technologies ‘Quicktionary’ a portable electronic pen that can scan printed text and immediately translate it word for word into other languages. The translation is displayed on an LCD screen and kept in the memory so that it can be transferred to a computer.

So in sum, Israel has the third highest number of patents and the highest number of startups per capita, worldwide. So it may be seen that Israel has become one of the leading contenders in terms of high-tech Hyperinnovation, attracting global giants to its shores.
MENA Scorpion Economies (Part-II)
A Sting in the Tale!

Looking wider, some of the world’s most familiar engineering archetypes orientated from the Middle East in the early stages the Persian civilization. Air Conditioning that circulates cool air through buildings without any input of energy were incorporated in dwellings and souks as early as 3000 B.C. The irrigating Persian Wheel, a partly submerged vertical geared wheel with containers attached filled and emptied into a trough that carried water to crop fields. The original Postal System appeared in the 6th Century BC Persian Empire. Parts of the postal system in fact outlived the Persian Empire, continuing to operate in Egypt, where it was seen and copied by Augustus, the first Emperor of Rome.

Ever wondered who thought up the idea of the Road? One of the first planned roads was the Persian Royal Road, built by Darius I, in 500 B.C in what is now Iran. The Royal Road was about 2,400-km long and stretched throughout ancient Persia. The road was constructed for royal use, enabling Darius to keep up to date, communicate orders, and to move goods needed by the royal court.

And perhaps we are seeing a return to this tradition of technological innovation in the region. For example, Terrain University is developing Surena, a humanoid robot. Recent tests compared the performance of four similar world class robots: Asimo (Japan), Reem-B (Spain), Justin (German), Charli (US) including Surena (Iran). The tests – carried out by the Institute of Electrical and Electronic Engineers (IEEE) - placed Surena in comparison the top 5 humanoid robot performance.

This has been taken a lot of effort, with over 10,000 man-hours have been spent on the state-of-the-art robot. Surena-II, which weighs in at 45kg with a height of 1.45-meters, has a human like stride, and is equipped with sensors such as a gyroscope and accelerometers providing steady motion. The next generation - Surena-III - will walk faster, recognize faces, objects, words and even sentences with intelligent responses.

In aerospace, things are making headway. Thirty years ago during the Islamic Revolution in Iran, the Air Force had only one combat unit. Today, Iran has moved ahead of such confines to make defensive military weapons; working on advanced radars with a range of more than 1,000 kilometers. Iran's capability in building aircrafts such as the Mirage and Simorgh, has lead to the design and the development of a new kind of jetfighter that cannot be detected by radar.

This fifth generation of undetectable military airplanes is to be manufactured in Iran in the near future. A third generation of defensive jetfighters dubbed the Sa'eqah has enhanced weapons capabilities in terms of the radar systems and ammunition. This growing aerospace expertise is emphasising the need to reach self-sufficiency in this respect. In the field of production of jetfighters Iran has made tremendous progress despite foreign pressures.

Heading south across Oman Gulf from Iran to the Island of Bahrain, is an ambitious project known as the Selman Industrial City designed to provide facilities for industrial development. It neighbours the Khalifa Bin Salman Port, the Bahrain International Airport and King Fahd Causeway which leads direct to Saudi Arabia, ideally placed for international companies seeking to set up industrial operations to service the multi-trillion dollar Gulf market. It is an outstanding location for auto manufacturing due to the availability of raw materials such as
Aluminium, low cost of energy and the availability of a skilled workforce.

The industrial sector plays a major role in the Bahrain economy, contributing approximately 16 percent of GDP (6 percent greater, in relative terms, than the UK’s manufacturing base in fact). One of Bahrain’s strengths is that it leads the Middle Eastern automotive sector. The Kingdom has extensive expertise, particularly in motor sport, high performance car manufacture and aluminium component fabrication.

One notable program is Tanmiyat Aloula Holdings who are setting up a solar power plant in Bahrain. The $200 million project will be run in collaboration with Bahrain University and the Bahrain Economic Development Board.

Then there is the prototype Nanotechnology Centre, supplying hands-on products used in multiple market sectors such as motor transport, medicine and construction. The centre aims to create a technological hub for scientific and engineering breakthrough in the region with significant emphasis on molecular nanotechnology. And it seems ironic that Silicone is one of the key materials in nanotechnology production!

In addition, construction has begun on a multimillion dollar investment on an industrial municipality off the coast of Hidd. A 600,000-sq-metre investment Gateway for Bahrain accommodating several industrial programs, business parks, storehouses, showrooms and advanced clean room assembly units. International manufacturing companies such as Kraft, Nestle and Coca Cola are all ready on the ground alongside MTQ Corporation who make apparatus for oil and gas industries, Abahsain Fibreglass, and home producers Awal and Ahmadi.
MENA Scorpion Economies (Part-III)
A Sting in the Tale!

A skip south down the coast from Bahrain, the United Arab Emirates has a vibrant open economy. Concerted efforts have been made to develop away from a reliance on oil and gas, now operating a substantial industrial base, combined with a robust and quite imaginative service sector. The establishment of free zones has been a significant facet of this diversification policy. The reform of property laws for example, gave a major boost to real estate and the tourist industry. Premium life styles, uber-entertainment and luxury retail is sprouting all over in the Gulf Region.

United Arab Emirates continues to hold a robust economy, protected near zero sovereign debt and by major overseas assets made possible during the period of rising oil prices. In particular, the government has assured continued investment at high levels, especially for long-term construction, communication and public projects.

Middle East and North Africa (MENA) countries – although some may say that North Africa is not strictly in the Middle East – most people would know that they share close cultural and religious ties. Nonetheless, according to The World Bank ‘sustaining recovery and looking beyond,’ 2011 report, over the last decade the region has expanded global trade, growing the share of world exports by some 20 percent. However, this is not enough for positive employment growth across the total MENA region in the longer-term. Basically there is a need to progress up the value chain and expand global reach.

Conventional wisdom informs that the region has restricted potential to export or achieve economies of scale, consequently disabling expansion in global trade. Traditional services such as hotels, restaurants and public administration, remain somewhat nominal exportable services. But modern services such as third party insurance, off shore call centres, logistics, transport and communication services, however, can engage in export services as well as profit from cost-reducing improvements and economies-of-scale.

The service sector has been an important source of economic growth and employment creation in MENA countries in recent years, indifferent to whether the country was an oil importer or exporter. Manufacturing is beginning to make reasonable economic contributions to growth in Tunisia, Iran, Egypt, Qatar and Jordan; and moderate-to-good job creation in Algeria.

Yet when it comes to manufacturing industry, it is not yet apparent that MENA would possibly aim for the established Asian route of manufacturing-led economic expansion. The World Bank continues:

‘However, this assessment bears watching since MENA’s manufacturing sector, although representing a low share of value added, compares favourably in size to East Asian countries at the time of their growth takeoff half a century ago.

However, even though MENA countries attract fairly modest foreign investment to manufacturing sectors compared to other sectors, such capital infusions mould disproportionately more jobs than overseas investment in other sectors. This suggests potential for MENA manufacturing growth if the countries become more engaged in global trade and more open to inflows of investments from abroad.

The bottom line? Nongovernment services and manufacturing can serve as engines of both job creation and income growth in MENA. However, the jury is still out on which of the two sectors will emerge as a sustainable source of long term growth. The details of the respective country policy reform programs will determine which, if either, of the two sectors comes out on top.’

One of North Africa’s great prides is the Moroccan economy; characterised by liberal free market practices and governed by microeconomic market forces. It has astonishing young population, with over half under the age of 25 year. Over the last two decades the country has followed a policy of privatisation of broad range of market sectors: Agriculture, Mining, Maritime Fishing, Textile and Garment Products and Tourism, to name a mere handful.


Aerospace industry, for example, is a fast growing sector, with prominent firms such as Labinal, Teuchos, Aircelle, DL Aerotechnologie, Safran Group, DAHER, EADS, Creuzet, setting up production units in Casablanca and Tangier. Today, the sector is made of 50 companies, providing 5000 jobs and has $394 million in revenues.


Automotive industry has had long ties with France, prompting Renault's presence in Morocco through the L90 Project. The new Renault-Nissan plant in Tangier represents an investment of €1 billion.  The new plant’s annual production capacity of 400,000 vehicles will play a part in ensuring the continued success of the Entry range across the world. The Tangier factory is the world's first zero carbon and zero effluent automotive plant. It is the southern Mediterranean basin's biggest automotive plant, with an estimated total staff of more than 6,000 by 2015.

There is Polydesign Systems (a branch of Polytech Netting), which relocated in Morocco to supply Ford Motors in Spain and won over other markets of Renault and PSA; currently representing 60 percent of turnover.

Telecommunications in Morocco has also emerged as one of the fastest growing broadband Internet markets in the world, growing at a rate of 200 percent by adding a total of 135,000 DSL lines, for a installed base of 179,000 lines.


The economy is characterised by an openness and curiosity towards the world. With particular attention to France, Morocco’s primary trade partner of Morocco. France is also the primary foreign investor, which has given key economic investment, especially in the automotive industry. The agricultural sector is very diverse and manufacturing sector is has been developing steadily during the last years, positioning Morocco as a major player in the world markets.


Moroccan government vigorously encourage direct foreign investment, adopting a number of initiatives intended to improve investment climate and turn Morocco into one of the most business friendly countries in the world. As a result 120 Americans firms, including Boeing, Dell, Proctor and Gamble, Coca-Cola, Time Warner are operating in Morocco. Including in excess of 150 Moroccan businesses representing hundreds of US products and services.

So for MENAs, they need to think about and act on both the formulation of innovation strategies and direct investment in innovation programs in the Middle East. Think of opportunities and threats, local and global, the discontinuities and eventual disruptions, plot the trends and forecast both the technological and market outcomes.

Build a culture of learning and innovation so that fear of failure is circumvented; be bold in small start project that scale-up to a disruptive proposition that owns the market and becomes the archetype; build incubator models and infrastructure, and arrange the capital investment streams and support initiatives.

Monday, 6 July 2015

Mighty China’s Tenacity: 
Entre the Dragonomics (Part-I)

‘Wisdom, Compassion, and Courage are the
Universally Recognised Moral Qualities of Men.’


China’s legacy over the past 5000 years illustrates that original innovation has always been an integral part of China’s evolving culture. 

Ancient and Imperial China was punctuated by many episodes of war and turmoil; but also unprecedented periods of peace and stability; where technology, the arts and ancient tradition flourished.

This not only brought prosperity, but gave the Chinese new ways of thinking and creating: producing streams of seminal inventions we take for granted today: Paper, Ink and Printing (preceding the Johann Gutenberg movable type by 1,200 years). Gunpowder (where fireworks and modern artillery shells owe their origin). The Magnetic Compass (via synthesising a mineral known as magnetite). And then not forgetting the world’s first Clockwork Mechanism; Flushing Toilet, Cast Iron; Blast Furnace; Abacus, Ship's Rudder; Woven Silk; Books; Paper Money; Acupuncture; MahJong, Kung Fu, and yes, Football!

Another important part of Chinese history was the dissemination of these innovations throughout the known world. Beginning with the illustrious Silk Road, a pre-modern trade route between the East and West; allowing The Tang Dynasty access to markets in Persia and Central Asia. Maritime trade routes also facilitate trade, enabling Chinese Junks to navigate the South China Seas and Indian Ocean all the way to the Horn of Africa where trade was first thought to have occurred with South African tribes.

The everyday tools, pursuits and trade links came from an inscrutable alchemy that has influenced so many turning points in human history. And now this deep-rooted civilization has continued to evolve; and is now entering a new chapter that has only begun to fine-tune its latent ingenuity and spirit.

Today, 1.35 billion people aggregated in 34 prefectures, including 22 provinces, 5 autonomous regions, 4 municipalities and 2 special districts; stretching some 5,000 Kilometres north to south; with a nominal GDP of $8.23 trillion in 2012 (est. 9.02 trillion eo-2013); with recent growth slowing to a galloping 7.7 percent; with foreign-exchange reserves of more than $3 trillion: Mighty Dragonomics.

China will overtake the USA within the decade, and account for ~19 percent of global GDP in PPP terms by 2020. Challenges loom large, however, including increasing labour costs, a latent real estate bubble and a rapid ageing arising from the government's one child policy.

Home to ~875,000 individual millionaires and 271 billionaires according to the Hurun Rich List; China will be the third richest nation in terms of private wealth within five years, and is expected to grow robustly thereon after. Even in the face of countless private firms holding off Initial Public Offering, the market remains relatively healthy with 5,183 new startups listed on 17 database in 2012.

There has been more than a marked transformation in corporate ownership over the last two decades. According to the Chinese Census National Bureau of Statistics, in 1990 the majority of firms were state-owned; a mere 98,000 were private enterprises (think small holdings). In contrast, funds raised through initial public offerings (IPOs) on China's Shanghai and Shenzhen stock exchanges reached ¥250 billion (39.3 billion US dollars) in 2012, according to PriceWaterhouseCoopers. Half of China’s ~6 million businesses are now in private hands.

Ultimately, China’s continued economic and internal wealth creation relies heavily on trade with the rest of the world. Consequently one of China’s main focuses over the next decade will be economic reforms that promote global trade ranging across diverse market sector access, intellectual property protection, energy regulation, environmental protection and consumer standards and safety.

Chinese policy makers are already some way into addressing changes in the country’s growth strategy especially with regards to avoiding the ‘middle income trap.’ The focus is on quality of growth, structural reforms to harness innovation and economic efficiency and social inclusion to overcome the rural-urban divide and the income equality gap.

This is further emphasised by The World Bank report ‘China 2030 Building a Modern, Harmonious, and Creative High-Income Society.’ The report puts forth six strategic directions for China’s new development strategy:

‘After more than 30 years of rapid growth, China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for. Six important messages emerge from the analysis:

First, implement structural reforms to strengthen the foundations for a market based economy.

Second, accelerate the pace of innovation and create an open innovation system.

Third, seize the opportunity to ‘go green’ through a mix of market incentives, regulations, public investments, industrial policy, and institutional development.

Fourth, expand opportunities and promote social security for all by facilitating equal access to jobs, finance, quality social services, and portable social security.

Fifth, strengthen the fiscal system by mobilizing additional revenues and ensuring local governments have adequate financing to meet heavy and rising expenditure responsibilities.

Sixth, seek mutually beneficial relations with the world by becoming a pro-active stakeholder in the global economy, actively using multilateral institutions and frameworks, and shaping the global governance agenda.’

From these proposals come the Communist Party of China’s Central Committee’s ‘12th Five-Year Plan (FYP) for National Economic and Social Development.’

FYP’s guiding principles focus on ‘inclusive growth,’ ensuring the benefits of economic growth are spread to a greater proportion of Chinese citizens. Key themes being rebalancing the economy, ameliorating social inequality and protecting the environment. Initiatives include a notional GDP growth rate of 7 percent, promoting consumption over investments and exports, closing the income gap through minimum wage hikes and increased social safety nets, and a range of energy efficiency targets. Healthcare, energy and technology sectors should also see a major boost. Not only have segments of these sectors been singled out as China’s new Strategic Emerging Industries (SEIs), but they also dovetail with the FYP’s emphasis on ‘inclusive growth.’

The government is encouraging foreign business participation in SEI development, but to what extent is a key question given China’s indigenous innovation drive. Foreign business can expect an increased cost structure during the 12th FYP period. Increased costs from wage and tax hikes, and raw material resource price reforms. On the positive side, foreign business can expect the government to continue opening up China’s services sector, to develop talent recruitment through education reform, and to strengthen the country’s intellectual property (IP) regime. The implementation of certain 12th FYP goals, such as increasing technological capabilities in a wide range of sectors, will have Chinese regulators welcoming advice and training from experienced foreign companies.

The 12th FYP is expected to pick up where the 11th FYP left off in terms of broad policy direction. The 11th FYP was considered a major policy shift for the Chinese government as it moved away from a focus on ‘growth at any cost’ toward a more balanced and sustainable growth pattern, under the ‘harmonious society’ (和谐社会 or hexie shehui) and ‘scientific development concept’ (科学发展观 or kexue fazhan guan) policy frameworks.

No longer content with being considered the world’s factory, Chinese planners have included several preferential tax, fiscal, and procurement policies designed to develop seven SEIs. Including biotechnology, renewable energy, high-end equipment manufacturing, energy conservation and environmental protection, clean-energy vehicles, new materials, and next-generation IT. With an aim to increase SEI’s contribution from today’s approximately 5 percent of GDP to 8 percent by 2015 and 15 percent by 2020.

The 12th FYP Guidelines has changed the previous creed of ‘Strong State, Wealthy People’ (国强民富 or guoqiang minfu) into ‘Wealthy People, Strong State.’

A key priority of the 12th FYP is for China to transition from ‘Made in China’ to ‘Designed in China.’ In order to achieve this goal, the government plans to heavily invest in science and technology education and R&D, and support ‘Next-Generation IT’ as an SEI.

China’s indigenous innovation drive will also continue to play a central role in this sector throughout the 12th FYP period. This is supported by so-called indigenous innovation support capabilities in technology through the use of several tools: including R&D investment in science and technology, to enable breakthroughs in sectors such as core electronic devices, integrated circuits, life sciences, space, marine, earth sciences and nanotechnology; Intellectual Property creation, use, protection and management; Administration strengthening fiscal and financial policies that support high-tech industry, including updating research funding management and venture capital investment; Commercialization to get the research undertaken at government-sponsored universities and research institutions to the marketplace; Next-Generation Information Technology accelerating the creation of G4 and G5 information networks, mobile communication and Internet; and finally, the government plans to invest in R&D of the ‘Internet of Things,’ cloud computing, and develop digital and virtual technologies.

Hence China’s technological innovation challenges over the next two decades will be nothing short of historic, in turn with a goal of taking 1.35 billion to ~1.8 billion people by 2025, moving up to a middle-to-high-income status all within the backdrop of an ongoing globally interconnecting economy.