By Hassan Abtidon

The world moved into “YOYO (you’re On Your Own)”. After the cold war the trade liberalization is on the rise and strong Western alliance become loose alliance; that every country its own to fight the national debt, deficit, employment and to keep certain economic growth. Somaliland/Somalia is a stone throw from the capitals of the worlds’ emerging markets and the Middle East resources. Peaceful Horn of Africa will be expected the most prosperous and gateway in business and link to all continents. Its people gained technology and speak major languages of the world.

Global Economic Overview:

The new global economic activities are changing our world and faster than we can imagine. The aim of Immigrant Professionals is to support the growth and the competitiveness of the received economies.

It makes sense in a world of global supply chains were almost nothing is made in one country anymore to riddle the world with preferential trade deals. Multilateral trade liberalization is what counts.

Low-cost workers:

The low-cost workers in countries like China and India, is dramatically altering the world’s economic geography. In the coming 30 years so many manufacturing activity be shifted to Asia.

The falling transportation cost:

Along with the falling trade barriers, meant companies no longer had to make goods close to where they were consumed.

Unskilled Labor:

Rich countries, accepted the decline of “unskilled labor intensive” business, such as clothing and toys, and concentrated policy on strengthened “knowledge-intensive sectors” with highly educated workers. Competition is not based just on companies or sectors, but on tasks.

India may have an advantage in software and systems that affects all industries in world, from banking and insurance to government services and airlines reservations.

Likewise, China may have competitive advantage in science that leads to offshore in research and development in many different industries. So it is individuals and not just companies that are exposing to global competition.

This could mean that lower-skilled tasks, such as hairdressing, retail sales clerks and driving a cab cannot be offshored, but the jobs of engineers, computer programmers, radiologists and accounts can be.

This turns upside down the idea that the rich countries will lose the low-skilled, low pay jobs and concentrated on the high-skill, high-pay jobs. It is easier to offshore a financial analyst’s job than it is to offshore a shop assistant’s job.

Sanctions vis Raw materials competition:

The world has moved into one block of capitalism and each country needs stable, secure and sustainable source of new material and energy for growth. An uncertain and often volatile world makes some countries included Canada a commodity superpower.

Iran and China have signed an energy deal worth as much as $100 billion (us). The Sinopec group, as China petrochemical is known to develop Iran’s Yadavaran Oil field and secure oil and gas supplies over a 25-year period. China would pay Iran as much as $100 billion over 25 years for the oil and gas purchases and for a 51 per cent stake in the Yadavaran oil field, in Khuzestan province near the border with Iraq.

The deal would allow China to buy 150,000 barrels of Iranian crude a day at market rate for 25 years as well as 250 million tones of liquefied natural gas. Russia’s deal of billions of (us) dollars to Iranian reactors is another factor. The Trade liberalization and the new International Order are parallel to each other and every country wants secure sources of raw materials for their businesses and trade stability.

In exploration of how the global economy will evolve over the next 25 years the rapid technological progress, trade in goods, and international sourcing of services come together to put new pressure on labor markets. We will see more Auto parts, vehicles, aircrafts, semiconductors, consumer electronics and pharmaceuticals produced in the developing world.

The opening up of China, India, Russia and much of Latin America to global markets added about 1 billion workers to the workforce. In the next 25 years the work labor force will expand by 1.1 billion people and all of that increase will occur in the developing world, 53 per cent of it in Asia.

While China and India can be expected to grow as manufacturing powerhouse, with their exports moving up the valued added ladder to more high-tech products, “white collar workers now also feel threatened”. The transfer of relatively skilled services activities to firms in developing countries is putting new pressures of white collar employment in both high-income countries and advanced developing countries.

China Vis India:

China and India are neighbors and rivals with land dispute and now they are in a race to be the world’s next economic power. So far, China, which got an earlier start on economic reforms, is winning the race.

China’s Gross Domestic Product (GDP) is more than double of India’s and even on a per capital Income is way ahead of India. In 2005 China’s per capita stood at $6,300 (us) compared to just $3,400 for India. The USA per capita GDP is $37,800 and Canada $29,700 respectively. As far as foreign investment is concerned China is running ahead of India by a ratio of about 10:1.

In the long run, however India may be the winner – India in fact is a technological sophisticated country with a middle class of some 300 million people (out of a population of 1.1 billion people).

In India Computers and cell phones are ubiquitous and homes in India have cable TV more than all of Latin America continent. On the corporate side, there are now more than 100 Indian companies worth more than $1 billion, including Mega Corps like TATA (Cars & Steeles), Reliance (communication), Birla (mining, Insurance, paper and other interests), Infosys (software), Ranbaxy (Pharmaceutical) and ICIC (banking).

India got democracy before capitalism and in the long it’s predicted that India’s democracy could be its greatest strength for orderly transitions in government, whereas, China’s communist a top capitalist economy and vulnerable to violent regime change.

The rest of the third world is growing too. Latin America has been averaging 4 per cent to 5 per cent growth based on exports. Sub-sahara Africa, after three decades of decline has seen greater than 5 per cent annual growth in recent years and the Middle East is not that far behind. These trends in developing world are increase driven by south-south trade as India and China and others consume commodities and natural gas from Latin America and Africa.

Economic Growth:

The economic growth means increase in national income of a country during a particular year. All the countries of the world want to maintain a reasonable rate of growth in their economies. The world economy will grow from about $35 trillion (us) in 2005 to $75 trillion in the next 25 years, with the share of developing countries rising from $8 trillion to $24.3 trillion.

Education:

The rich countries will continue to have the advantage to lead in productivity- enhancing innovation. China, India, Brazil, Russia and other countries are investing heavily in education and graduating large numbers of scientists and engineers. But innovation is not dependent simply on the number of scientists and engineers, institutions, environment that build up over time that encourage path-breaking innovation, it also depends how your business community catch up the business tactics with changing global trade.

Foreign Takeovers:

Sure open-door policy on foreign investment may be at risk of losing control over its economy and that key corporate decisions affecting jobs, wages and pensions will increasingly be made somewhere else. The trade is becoming borderless and companies can’t isolate themselves from the trade liberalization, the question here how much a country prepares to give up trade for sovereignty.

Every major Auto Industry decision to invest in Canada is made in Detriot, Tokyo or Frankfurt because no restriction. Canada invests other countries at much faster rate than foreign companies are investing here. In the middle of 2006 Canada investment in abroad stood $475.3 billion, compared to $434.8 billion in foreign direct investment here.

International economy is a resilient in the face of so many uncertainties, which include the U.S. budget and the current deficits, weak growth in Europe, Chinese and Indian economies that are overheating, and the breakdown in the global trade talks at the World Trade Organization.

U.S. economy:

U.S. economy is the biggest and from an economic point of view, the biggest challenge is to correct the continuing high U.S. budget and trade deficit, which at some point threaten to bring down the entire global economy if not addressed.

The central banks of Asia, notably Japan, China and Taiwan, as well as the big oil exporting countries, are keeping the US economy going, and the US dollar stronger than it shouldn’t be by financing huge US deficit made possible by their own excessive trade and current account surplus.

But a continue buildup of US government debt, with that debt held increasingly outside the united states by foreign governments, is clearly not sustainable. Foreign holdings of US government debt totaled $2.4 trillion (US) at the end of last year (2005), and that amount continues to increase.

Interest payments last year, totaled $114 billion (US) and, with both the total level of debt expected to grow and with interest rates expected to climb, there’s a serious question as to how long this pattern can continue.

US government interest payments to foreigners, mainly foreign governments, are already greater than US government spending on education, training, and employment and social services.

As the international Monetary Fund warned in its World Economic Outlook this year, these imbalances are the biggest vulnerability in the world economy. But resolving them will be enormously difficult since the rest of the world depends on the US appetite for imports.

Canada is no exception. In 2005, US imports of goods and services totaled $2 trillion. So a decision by the United States to unilaterally eliminate over a number of years its budget and trade deficits would hit other countries, including Canada, hard. The US dollar might have to depreciate up to 40 per cent against its main trading partner currencies and the US economy would go into recession.

Emerging New Multinationals:

There is a huge change underway in the global economy. The emergences of a growing number of new multinationals from emerging economies that will increase challenge the economic power of the rich-country world.

In a recent Fobres Magazine list of the world’s 2000 largest public traded companies, 378 were from emerging economies around the world. This list did not include the giant state-owned oil companies in the developing world, which control 65 per cent of the planet’s known oil and gas reserves. Many multinational companies and corporate headquarters are emerging in Shanghai, Mumbai, Sao Paulo, Mexico City, Istanbul and other new-world cities.

In the early months of 2006, the Boston Consulting Group published the names of 100 fast-growing companies from 12 developing countries, drawn from a list 3,000 companies. The companies, which Boston says are the most likely to become leading multinationals were chosen based on the percentage of their revenues from overseas sales, their global manufacturing, distribution, network and their ability to innovate.

The Brazilian mining company (Vale do Rio Doce) is the fourth-largest mining company in the world. Brazil is also home of to Petrobras Petroleo Brazil, one of the world’s largest oil and gas companies, as well as Embraer, which has overtaken Bombardier as the world’s third-largest air-craft company.

The Russian company MMC Norilisk Nicklel is the world’s largest nickel producer. Russia is also home to one of the world’s top three aluminum companies, Russal, which is fast becoming a global company.

Energy in one sector where emerging-economy countries dominate. Gazporm, the giant Russian oil and gas company, has the world’s largest reserves of natural gas, following by the National Iranian Oil Co. and Qadar Petroleum.

Saudi Aramco has the world’s largest share of oil reserves, following by the National Iranian Oil Company, the Iraqi National Oil Co., and the Kuwait Petroleum Corp.

South Korea and Taiwan have already demonstrated how impoverished economies can make their way on to the world stage, and do it within a single generation. South Korea successes include Samsung electronics, one of the world’s most important semiconductor companies, Hyundai Motor and Kia Motors, competitive automobile companies, and LG electronics, a major manufacturer of electrical appliance. Taiwan has an array of semiconductors and electronics companies that compete globally.

China of course, will become increasingly important. Much attention is focused on its drive for resources, particularly oil and gas and minerals. Petro-China, China Petroleum and Chemicals (Sinopec) and China Minerals Corps. Are examples. The Chinese multinationals are to include Huwaei Technologies Co., a growing competitor to Cisco Systems, Nortel Networks and others; Lenovo Group, which acquired IBM’s personal computer operations and is now a global computer company; and Haeir Co., a fast-growing manufacturer of home appliances.

Other Chinese up-and-comers include BVD Co., the world’s largest manufacturer of nickel-cadmium batteries, John Electric, the world’s largest maker of small electric motors, China International Marine Containers Group, which supplies 50 per cent of the world’s marine container market and Pearl River Piano Group, the world’s largest manufacturer of Piano.

India is also moving strongly into the global economy. Its best known for its high-tech companies like Tata Consultant, Infosys Technologies and Wipro, providing software and other IT services around the world, and pharmaceuticals such as Ranbaxy, with acquisitions in Europe and North America.

The Boston Consulting Group calls the emergence of these developing world multinationals “a revolution in global business,” adding that its list of 100 companies “represents just a small sample of the rapidly developing economy-based challenges that will ultimately emerging on the world stage.

These developing multinationals will over take the well established businesses of developed world or loss of decision-making head offices in their homeland. Remember money takes refuges the safe economies that yield good returns.

Emerging economies vs Human behavior:

Hundreds of millions of people in the developing world, from China, and India to Brazil and Mexico, have moved out of serious poverty because they now have jobs of manufacturing products for rich-country markets.

With the entry of Russia, China, Brazil and Mexico into the global economy after decades of isolation, the size of the global workforce has roughly doubled and this expansion of global capitalism to China, India and other former Soviet Bloc has initiated a critical transition period for workers around the world.

The single mothers and seniors in the rich countries with fixed or modest income are clearly better off because they can buy cheaper clothing, shoes and other products made in the developing world. These lower prices stretch their incomes further.

Some jobs may disappear or pay and benefits are slashed in response to the new competition. But this is a challenge for policymakers to ensure the displaced workers get the necessary training to take advantage of the new opportunities.

Collection paper of world economic information

Hassan Abtidon

M.Phil in Economics

Email: audal2005@hotmail.com

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