Global Archives - BOLLYWOOD SURKHIYAN

Investing In A Developing Economy – A Possible Solution To Global Financial Crisis

INTRODUCTION

If there were security problems in Nigeria, no businessman would go to the country to explore opportunities, companies like Celtel, MTN, Etisalat, would not have ventured into security risk country to do business. Those who spread rumour about security and corruption problems in Nigeria are saying so to stop others from making money in the country. Figures don’t lie. They are the biggest testimonies for how conducive Nigeria’s environment for business and opportunities are. If you want to do business in Africa and record good returns on your investment, I welcome you to come to Nigeria. The political environment in Africa, particularly in Nigeria is tremendous.

Dr. Hamadoun Toure,

Secretary General,

International Telecommunications Union,

Cited in the Punch Newspaper, May 13, 2008)

What is happening currently with the Nigerian financial system is far from being affected in any way by the global credit crisis. At global level currently, the banks are under-capitalised, but Nigerian banks are over-capitalised. And I do not think this is a problem at all. I believe that Nigerian banks are under pressure from other economies within Africa continent that are affected by the credit challenges.

– Gordon Smith,

Head of Research, Africa and the Middle East, International Consilium,

(Reported in the Punch Newspaper, June 30th, 2008).

The foregoing statements aptly connote two understandings of the state of Nigerian economy. These understandings show that, the economy is one of the fastest growing economies in Africa and in the world. Although Nigeria has had hash economic history, it has undergone and still undergoing economic reforms, which are aimed at making Nigeria the Africa’s financial hub and one of the twenty largest economies in the world by the year 2020. Needless to say that the country has experienced political instability, corruption, and poor macroeconomic management in the past, this was responsible for unpleasant and harsh economic situation. The government relentless efforts to reposition the economy have translated into a remarkable economic growth and development. Several mechanisms have been put in place to sustain this growth and development, capable of balancing the interests of stakeholders. Perhaps, this view must have influenced Gordon Smith submission. He described Nigeria as the most dynamic market in Africa, which is under severe pressure from some countries in Africa to serve as a cushion against the effects of global turbulence. He also noted that some countries like Ghana, Malawi, Mauritius, among others were depending on her at the moment due to global risk exposure and that the country’s economy, led by the consolidated banks, was far from being affected by the global credit crisis currently rocking the world’s financial giants. He stressed further that foreign investors, who will be patient enough to weigh the Nigerian financial system on the credit risk perspective relative to global events, will find the nation’s financial sector more interesting to invest and raise capital from.

Faced with numerous challenges, Nigerian government is determined to strengthen, diversify and make the economy attractive and investment-friendly to both local and foreign investors. The government has adopted total liberalization and globalization as the economic policy, instituted privatization and commercialization programmes of public enterprises, provided total security for business and people, extended invitation to domestic and foreign investors, abolished laws inhibiting competition, embraced and fine-tuned policies to ensure quick realization of growth and development of all sectors of the economy. The effort is already paying off as Nigeria is now the focus for foreign investment thereby increased exponentially Foreign Direct Investment (FDI). Scores of economic missions and delegations from developed and developing countries have visited Nigeria, thus accelerating the growth of the economy at a very fast rate.

It becomes pertinent to direct the course of this discussion to embrace the second understanding of the above statements made by Hamadoun Toure and Gordon Smith. However, it becomes more pertinent to enumerate the inherent investment opportunities in Nigerian economy before discussing the issue of security as raised by Toure.

INVESTMENT OPPORTUNITIES AND SECURITY ISSUE IN NIGERIA

No doubt, Nigeria is an investment haven with countless and lucrative investment opportunities including oil and gas, solid mineral, agriculture, tourism, telecommunication, power and steel, transport, trade processing zone, financial sector, real estate / property, manufacturing, sport and entertainment, and fashion industry. Investors have a wide range of opportunities to choose from. It is important to note that the rate of growth of investment is fantastic and exponential in any of these sectors. Investors are at advantage of presenting their products and services to already-made market taking advantage of the population of over 140 million.

In telecommunication, statistics reveals that mobile phone users in Africa were about 280 million, overtaking United States and Canada with their 277 million users in the opening quarter of 2008. With 70 million connections in 2007, the Continent became the fastest growing region in the world, representing a growth of 38 per cent, ahead of the Middle-East (33 per cent) and the Asia-Pacific (29 per cent).It was also revealed that the fastest growing markets are located in northern and western Africa, representing altogether 63 per cent of the total connections in the region. The record showed that Nigeria, Zambia, Tanzania, The Democratic Republic of Congo, Kenya, Algeria, Tunisia, Ghana and South Africa are highly competitive markets in the Region. The record further contends that two-third of Africa’s telephony are in their early phase of development, with penetration rates below 30 per cent at the end of 2007.In percentage terms, it was noted that Africa is the fastest growing market in the world, but also the second smallest in terms of connections after Middle-East.

As Nigeria accounts for 57 per cent of the West Africa mobile phones, the country is acknowledged as the leading and the fastest growing telecom market in Africa. With mobile phone users at 44,932,181 and 734,444 for GSM and mobile CDMA respectively, her contributions to West Africa and Africa’s telecommunication growth can not be overemphasized. While the overall economic growth rate stands at 7% per annum, the mobile telephony is about 35-50%. Assuming that each of these connections was busy for a minute in a day, the country telecoms market has the capacity to generate over USD 16 million per day (USD16, 666,667) and close to USD 6 billion per year (USD 5,833,333,300). This is why telecom companies such as Visafone and Etisalat quickly joined the likes of MTN, Globacom, Celtel and other telecoms service providers in exploiting opportunities in the country.

Early this year, one of the main GSM service providers with a subscriber base of over 15 million announced a profit after taxation of USD650 million (78 billion naira) for the year 2007.Putting all these together, one can easily understand Toure’s submission describing Nigerian telecoms market as the best investment destination in Africa.

Recognizing the fact that the Nigeria telecoms industry is enormous and there is need to further exploit the sector to its fullest, the Nigeria Communication Commission (NCC) and the Ministry of State for Information and Communications have made their positions clear by extending invitation to global investors for active participation in the sector as they are willing to grant pioneer status and license for prospective applicants for various undertaking such as Fixed telephony, Mobile telephony, Fixed satellite (VSAT),Paging, Payphone, Internet and other value added services.

With the above facts, one can safely conclude that Nigerian telecom sector offers fantastic and lucrative investment opportunities to global investors. And putting into consideration 40% GSM market growth rate in the first quarter of this year (2008), there is potential for high return on investment in this sector.

Agriculture, the dominant sector of Nigeria economy, engages about 70 per cent of the population directly and provides nearly 88 percent of non-oil foreign exchange earnings. It contributes about 41 per cent of the GDP of the country. The sector recorded an overall growth rate average of 7 per cent in the last three years, a major improvement from under 3 per cent in the 90’s.

Statistically, 91 million hectares of the country’s total land area of 92.4 million hectares is adjudged to be suitable for cultivation. Approximately half of this cultivable land is effectively under permanent and arable crops, while the rest is covered by forest wood land, permanent pasture and built up areas. Among the states, which have the most abundant land, areas are Niger (7.6 million hectares) and Borno (2.8 million hectares).

Agriculture crops in Nigeria are grouped into cereals, root and tuber crops, grains legumes and other legumes, oil seeds and nuts, tree crops, and vegetable and fruits. Governments and the Ministries of Agriculture have made land acquisition easy, encouraged agricultural practices, extended (still extending) invitation to foreign investors and have put in place several incentives to stimulate growth in the sector. Despite, the agricultural potential of Nigeria is barely being tapped and this explains the inability of the country to meet the ever-increasing demand for agricultural products and her rank as 55th in the world (although first in Africa) in farm output.

As the world experiences food crisis and persistent rise in fuel price, the country’s agriculture offers unlimited opportunities for foreign investors and the world at large to provide solutions to these crises. Foreign investors will find investments in cultivation of sugar cane, sugar beet, sweet sorghum, starch (corn/maize), palm oil, soybeans, jatropha, and algae. These products are lucrative as they are potential for biofuels, a good substitute for fossil fuel. Presently, there is a very high demand for these crops from the developed economies.

Solid Mineral is another sector with great investment opportunities. Nigeria is endowed with numerous mineral resources. Recent policy reforms have brought the solid minerals sector to the fore. The emphasis is on encouraging massive foreign investors’ participation in this sector as less than 0.5 per cent is contributed to the Gross Domestic Products from Solid mineral sector. However, the Ministry of Mines and Steel and the Ministry of state’s focal attention in the last one year is to strategically place the country in a better position to explore and exploit just seven minerals in the plethora of minerals so as to increase Gross Domestic Product to 5 per cent within the next few years. The seven strategic minerals are coal, bitumen, limestone, iron-ore, barite, gold and lead / zinc.

Coal can be found in Enugu, Benue and Kogi. Within these three districts 396 million metric tones can be demonstrated using JORC classification criteria, while an additional 1,091 million tones of inferred and hypothetical coal resourced for the areas studied is 1481 million tones.

Knowing fully that development of coal will assist in the realization of energy, the Government and the Ministries are inviting foreign investors to participate actively in the exploration and exploitation of the mineral. Companies such as Denver Resources and Western Metals have already committed US$10 million and US$15 million respectively for two coal fields in the country. Another Chinese firm, Grid Xin Yuan International Investment Company that is providing more than half of China’s electricity needs is also in the country, indicating their interest in the development of a coal field in Kogi State.

The Bitumen reserve in the country is estimated at more than 27 billion barrels of oil equivalent while iron-ore is estimated at over 5 billion inferred reserves with presence in Kogi, Enugu, Niger, Zamfara and Kaduna States. Gold in just 10 locations is estimated at 50,000 ounces, barites 10 million metric tones and limestone at 2.3 trillion reserves.

Talc with an estimated reserve of over 100 million tones can be found in Niger, Osun, Kogi, Kwara, Ogun, Taraba and Kaduna States.The colour of the Nigerian talc varies from white through milky-white to grey. The talc industry represents one of the most versatile sectors of the industrial minerals in the world. The exploitation of the vast talc deposits in Nigeria would therefore satisfy not only the local demands but also that of the international market as well.

The national demand for table salt, caustic soda, chlorine, sodium bicarbonate, sodium hydrochloric acid and hydrogen peroxide exceeds one million tones. A colossal amount of money is expended annually to import these chemicals. There are salt springs at Awe (Platue State), Enugu, and Uburu ( Imo State), while rock salt is available in Benue State. A total reserve of 1.5 billion tones has been indicated. Government, to ascertain the quantum of reserves, is now carrying out further investigations.

In the same vain, large bentonite reserves of 700 million tones are available in many states of federation ready for massive development and exploitation, over 7.5 million tones of barite been identified in Taraba and Bauchi states, and an estimated reserve of 3 billion tones of good kaolinific clays has also been identified.

Gemstone mining has boomed in various parts of Plateau, Kaduna and Bauchi States for years. Some of these gemstones include Sapphire, Ruby, Aquamarine, Emerald, Tourmaline, Topaz, Gamet, Amethyst, Zircon, and Fluorspar, which are among the best in world. Good prospects exist in this area for viable investment. Understanding that this sector requires urgent investment, the Ministry has directed miners who are still in small artisan levels to form cooperatives so as to benefit from World Bank US$10 million assistance. Apart from this, three Nigerian Banks have also established solid minerals desk with fund of over US$ 8 million each for the development of the sector.

Foreign investors will find this sector worth-investing on as Nigerian governments have put in place various incentives and strategies for investment such as 3-5 years tax holiday, deferred royalty payments, possible capitalization of expenditure on exploration and surveys, extension of infrastructure and provision of 100% foreign ownership of mining concerns.

Recognizing that only a sustained macroeconomic environment and a sound and vibrant financial system can propel the economy to achieve the country’s desire to become one of 20 largest economies in the world by the year 2020, on the July 6, 2004 the Federal Government through the Central Bank of Nigeria (CBN), under the leadership of its Governor, Professor Charles Soludo launched a 13-point reform agenda to restructure, refocus and strengthen the Nigerian Financial System. To complement this agenda, another comprehensive long-term reform agenda for the Financial System (the Financial System Strategy 2020-FSS2020) was launched. The grand objectives of these agendas are substantially being achieved. The country financial system now comprises of strong, efficient and internationally competitive banks with an eye for global markets, a capital market with highest returns on investment, in dollar terms, a sound and rewarding insurance industry and other competitive financial participants.

Gordon was right in his submission to have described Nigeria as the most dynamic market in Africa. His view that “foreign investors, who will be patient enough to weigh the Nigerian Financial System on the credit risk perspective relative to the global event, will find the nation’s financial sector more interesting to invest and raise funds from” x-rays the truth about the country’s financial sector.

The country’s banking system is the safest and the soundest it has ever produced in history. It is the fastest growing banking system in Africa and one of the fastest in the world. In fact, the most outstanding contribution towards realization of the country’s dream came from this sub-sector. Economic analysts have observed that it has taken Nigeria less than 3 years to achieve what it took South Africa 20 years to achieve in the area of banking. In a short word, a world-class banking system has emerged in Nigeria.

Statistically, banking sector contributes 10 per cent to the Gross Domestic Product (GDP) and represents 60 per cent of the stock market capitalization, while there was a reduction in the number of banks from 89 to 25, the number of banks branches rose by 33 per cent from 3383 in 2004 to 4500 in 2007. The total asset base of banks rose by 104 per cent from $ 26.8 billions ( 3.21 trillion naira) in 2004 to $54.7 billion ( 6.56 trillion naira) by mid 2007; capital and reserves rose by 192 per cent from $2.72 billion (327 billion naira) to $7.98 billion ( 957 billion naira); capital adequacy ratio rose by 42.6 per cent, point from 15.18 per cent to 21.6 per cent and ratio of non-performing loans total loan improved massively by 51.3 per cent, point from 19.5 per cent to 9.5 per cent. The sector has also remained one of the most profitable in the country’s capital market. It was noted that 13 out of 21 quoted banks on the Nigerian Stock Exchange recorded returns in excess of 100 per cent since January 2007.

According to the April 2008 edition of the African Business, (the best-selling Pan-African Business Magazine published in London) 18 out of 28 West African Companies with market capitalisation of more than $1 billion are Nigerian Banks. The magazine stated that First Bank Nigeria Plc with market capitalization of $7.4 billion remains the largest company in West Africa. Two other Nigerian banks namely Intercontinental Bank Plc and United Bank for Africa (UBA) remain the second and the third largest companies in the sub-region with market capitalization of $6.2 billion and $4.6 billion respectively.

Apparently, the rising tide of banks in the country from all indications has made the sub-sector very attractive, not only to local investors, but also to foreign investors, and in particular, foreign banks. For instance, the consolidation of Regent Bank, Chartered Bank and IBTC to form IBTC Chartered Bank attracted the interest of the Standard Bank Group, the largest financial institution in Africa with a market capitalization of $ 17.8 billion, whose subsidiary Stanbic Bank, also of South Africa has just sealed a Merger deal for the latest Merger in the country, Stanbic IBTC Bank Plc. In this direction, other foreign banks have started making enquiries with CBN of a possible Merger or take-over.

To further substantiate the opportunities the banking sub-sector offers the global investors, a cursory look into Intercontinental Bank Plc will reveal the success of banking system in the country. Intercontinental Bank Plc is known to be the second largest companies in West Africa to have recorded a phenomenal growth in gross earnings, which stood at $1.45 billion ( 173.5 billion naira) in 2008. This is an increase of 99 per cent over the $728 million (87.4 billion naira) in 2007, profit after tax grew by 102 per cent to $380 million ( 45.6 billion naira) as against $188 million (22.6 billion) in 2007, while the capital base rose to $1.67 billion from $1.31 billion. The bank deposit base soared to $8.75 billion ( 1.05 trillion naira), an increase of 126 per cent from $3.9 billion (468 billion naira) in 2007, while the total assets also recorded a quantum leap to $14.2 billion (1.7 trillion naira), representing a growth of 108 per cent from $6.86 billion( 823 billion).

The bank is also in strategic partnership with BNP Paribas, the world leading energy financing bank, Afrexim Bank; Export Development Canada (EDC); Finance for Development (FMO); China Exim Bank; Export-Import of United States; International Finance Corporation in financing projects in different sectors of the economy. However, it is relevant to say that the success recorded by Intercontinental bank is a good example of the Nigerian banks’ strength and prospects, and a testimony to opportunities available to global investors in the country’ financial sector.

Apart from the above, Nigerian Capital Market offers viable opportunities as it is positioned to help companies to raise capital, and to generate high returns on investment. Its total market capitalization has grown by over 4000 per cent to $100 billion (12 trillion naira) in March, 2008, up from $2.39 billion (287 billion naira ) in August 1999.Among emerging markets, the Nigerian Capital market remains one of the most viable in terms of returns on equity. Historically, the market has delivered 28 per cent returns.

Insurance industry is not an exemption to this growth and development the country’s financial sector is witnessing. Although there are few black spots on the regulatory handling, the industry has equally recorded success in their reforms and operations. With the inflow of robust capital, insurance companies are now faced with the challenges of delivering returns to shareholders, maximizing value and exploring overseas markets. Their presence can be felt in countries like Ghana, Liberia, Sierra Leone, Sao Tome, South Africa among others.

Although Goldman Sachs’ report titled “New Market Analyst” with issue number 08/09 released on March 13, 2008 (cited in the Thisday newspaper March 19,2008) posited that Nigeria is a better economy than South Africa, International Monetary Fund (IMF) reported that Nigeria and South Africa got close to 50 per cent of the $53 billion private equity and debt flow to Sub-Saharan Africa in 2007. This underscores the growing confidence of International bodies and foreign investors in country’s financial sector and economy at large.

Furthermore, Fitch Rating Agency and the Standard and Poor rated Nigeria BB-(minus) in the area of sovereign credit, high in development of local currency debt market, and low in the areas of debt to GDP ratio and inflation. The opportunities for growth in Nigeria financial sector are still strong as the underlying fundamentals driving the growth are still present. All these and more, position the financial sector and the country at large as a leading and most dynamic market in Africa and present viable investment opportunities to global investors.

Needless to say that the opportunities presented above are typical examples and an evidence of opportunities awaiting foreign investors in other sectors of the economy.

Nigeria is the largest producer and exporter of oil in Africa (although recently placed second behind Angola in the latest OPEC report as a result of Niger Delta Crisis) with a production of 2.5 million barrels and above a day. Besides, the Nigeria is the 7th world’s gas reserve holder and the highest flaring nation in the world, with the potential to become a major player in LNG export. It has annual gas flares’ capacity to generate over 12000 MW of electricity needed to catalyze the growth of any economy. Although it currently flares an average of 1.2 TCF of gas annually, the sector has the potential to generate great returns on investment.

One of the greatest opportunities awaiting foreign investors is Real Estate / Property. For instance, Lagos Metropolis with a population of about 18 million has attained mega city status. The State has one of the highest urbanization rates in the world according to the World Bank. Consequently, there is an insatiable demand for housing delivery, which has necessitated the introduction of the New Private Estate Developers Scheme. Under the programme, the government will make large parcels of land ranging from 1 to 25 hectares available to corporate organizations capable of undertaking development and delivery of housing units. Such organization must however demonstrate that they have the financial capacity and technical expertise to deliver quality and affordable housing units.

Among other sectors of the economy that foreign investors will find viable and worth-investing on are Transport, Sport and Entertainment, Tourism, Power and Steel, Export Processing Zones, Privatization. And available records reveal that the rate of returns in these sectors is as high as in the sectors discussed above.

Apart from the opportunities mentioned above which our office is strategically positioned to maximize opportunities for the benefit of prospective investors. We also offer consultancy services in the areas of general management, manufacturing, marketing, finance and accounting, personnel, research and development, packaging, administration, international operation, specialized services and other value-adding services. And our strategic partnership with national and international companies put us in position to deliver quality service and high returns on investment.

Nevertheless, there have been fears raised by international observers, agents and bodies that Nigeria is a high-risk nation for investment and other business transactions. This development is attributed to security, multiple taxation, epileptic power supply, bad roads and poor work environment.

It may appear that doing business in Nigeria is challenging because of the activities of a few untrustworthy Nigerians who are unscrupulous. But such are simply characterization of human nature; as it can be found anywhere else in the world. It must be said emphatically that the world has been biased in their judgment and treatment of Nigeria security issue. There have never been terrorist attacks, suicide bombings or kidnapping until recently when the issue of Niger Delta came on board.

Niger Delta region-the source of nation’s oil wealth- has become an area of perennial tension, agitation, and recently, militancy. However, a confluence of factors such as environmental damage by oil exploitation, failure to develop the region, lack of job opportunities and sense of deep deprivation from the low share of derivation revenue accruing to the states in the region, has led to the present situation. Acknowledging their situation, the Federal Government has organised a Summit, to be chaired by Professor Ibrahim Gambari, the United Nations Under Secretary General, to provide everlasting solution to the crisis. Frankly speaking, Nigeria is a safe and investment-friendly place and Nigerians are accommodating and industrious.

Cyber Crime is another fearsome crime, which often put-off prospective investors from involving or investing in the business opportunities in Nigeria. This crime was actually imported into the country by expatriates. It has never been part of Nigeria culture. It is perpetrated by a few section of the population. Their operations are carried out via Internet and their targets are people who transact business via the medium. They pose as government officials and sometimes as businessmen with United Kingdom identity who deal in digital products. However the list of their tricks and operations is not exhaustive. With the help of Economic and Financial Crime Commission (EFCC), Independent Corrupt Practices and Related Commission (ICPC), and other Anti-Criminal Agencies, Cyber Crime and their perpetrators are under control and disappearing.

The grand objective of the present administration, as encapsulated in VISION 2020, is to make Nigeria a major industrial and economic power, and one of the 20 largest economies in the World by the year 2020 by providing enabling investment and business environment and maximum security for active participation of local and particularly, foreign investors. The realization of these aspirations had informed the radical and pragmatic reforms designed to increase the attractiveness of Nigeria’s investment opportunities and foster the growing confidence in the economy. In this direction, the Federal Government has provided incentives and strategies for investment such as 3-5 years tax holiday, deferred royalty, possible capitalization of expenditure and provision of infrastructures such as road and electricity, just to mention a few.

African economy is witnessing the strongest growth in 30 years; no doubt, Nigeria is one of the major contributors to this development. Most commentators have observed that the opportunities for business and investment in the country look increasingly rosy with GDP growth of 7 per cent in 2007 and 13 per cent in the next 12 years. The International Monetary Fund (IMF) forecast of 9 per cent growth rate for Nigeria in 2008 (which is second to India 10 per cent and ahead of China 8 per cent) lays credence to their observations.

Furthermore, the increase in Foreign Direct Investment, the entrance of multinational companies, the strong financial sector, the favourable and tremendous business environment, the government support, the abundant natural resources, and the population of over 140 million people, among others, put Nigeria in a comparative ( and possibly absolute) advantage over other African countries.

Just as it is difficult to ignore China as a market in the global arena, (one out of every five persons in the world is Chinese) so is it very difficult to ignore Nigeria as a market in Africa (one out of every three persons in Africa is Nigerian). With a population of over 140 million people and its economic potential, Nigeria still remains Africa most important market.

IMPACT OF GLOBAL FINANCIAL CRISIS IN A DEVELOPING ECONOMY

Unlike China and India, African economy(developing economies) is yet to be integrated into the world economy. This is as a result of slow rate of integration and globalization at which the economy is being fixed into the global economic and financial system. Consequently, developing economies will only suffer a limited financial impact from the credit crunch. However, this is not to say that developing economies are in isolation and totally free from the crisis.

To grant a point, this paper will continue to use Nigerian economy for its analysis as it represents a paradigm of a developing economy with valid and considerable variables.

According to the report from a recently concluded Bankers Committee Meeting, which ended on October 20 th, 2008 , the Nigerian banks are safe as they operate at 22 per cent capital adequacy ratio( 14 per cent above the world 8 per cent requirement) and the financial sector is far from being affected by the current global financial crisis. The report also posits that any bail-out scheme is unnecessary as the situation that warranted bail-out schemes in developed economies- poor quality assets and heavy loan losses resulting from exposure to inadequately collateralised mortgage loans- is absent in Nigeria. To underscore its point, the report noted that, as the Direct Foreign Investment in Nigerian banks is comparatively low and the banks connection with their foreign counterparts is loosely fixed, the impact of the crisis will be limited and indirect.

Conclusion

The words of Mr. Dominique Strauss-Kahn, the Managing Director of International Monetary Fund, at a meeting in Washington D.C are the corner stones of the concluding thoughts of this paper. He stressed as follow:

We meet at an extra-ordinarily difficult time- a time of uncertainty and insecurity, with a danger that those fears push us away from- not towards- a more inclusive and sustainable globalization….At its best, multilateralism is a means for solving problems among countries, with the group at the table willing to take constructive action together. When multilateralism is dysfunctional, globalization can be a Babel of Tower, with competing national interests colliding to benefit none. The new multilateralism, suiting our times, is likely to be a flexible network, not fixed system. It needs to maximize the strengths of interconnecting actors, public and private, profit-making and civil society Non-Governmental Organisations (NGOs). The multilateralism must respect state sovereignties while solving interconnected problems that transcend borders…The private sector cannot restore confidence on its own. Macroeconomic policy measures by governments cannot restore confidence on their own. Piecemeal measures on financial markets will not restore confidence on their own. What will restore confidence is government intervention which is clear, comprehensive and cooperative among countries..The world must act quickly, forcefully and cooperatively to contain the ongoing financial and economic downturn.

Thus, the position of this paper is that the confidence will only be restored if “government intervention which is clear, comprehensive and cooperative” is complemented with investment in developing economies with less or no crisis impact as “flexible multilateralism” and cooperative and sustainable globalization is solution that suits our time, not” economic isolationism”.

10 Indian Industry Sectors to Perform Well in Current Global Recession

As every business sector is affected by present global crisis and everybody is talking of slow down in business, still in India there are few sectors which will grow in this adverse situation. Lets have a look.

1. Food

No one can survive without basic food material like milk, vegetables and drinking water. Food processing companies will not be affected much and rather will earn profits by increasing the prices. These are the basic needs which we as a common man can not produce by our self.

According to MFPI, the food processing industry in India was seeing growth even as the world was facing economic recession. According to the minister, the industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-04.The Indian food market is estimated at over US$ 182 billion, and accounts for about two thirds of the total Indian retail market. Further, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025

2. Railway

As the aviation sector has been affect much badly and resulting in sharp rise in the air ticket rates the frequent travelers will prefer railways to cut the cost of traveling and this will result in increased traffic in railways and long queues at railway booking counters. The freight traffic of Indian Railways has continued to grow in the last few months, albeit at slow pace, indicating only marginal impact of the global recession on the Indian economy.

The Railways registered 13.87% growth in revenue to Rs 57,863.90 crore in the first nine months ended December 31, 2008. While total earnings from freight increased by 14.53% at Rs 39,085.22 crore during the period, passenger revenue earnings were up 11.81% at Rs 16,242.44 crore. The Railways have enhanced freight revenue by increasing its axle loading, improving customer services and adopting an innovative pricing strategy.

3. PSU Banks

As seen in the private sector much of the job cuts due to global slowdown, its the PSU sector Banks which gained much confidence due to job safety and security. More and more people are likely to turn towards government institutions, particularly banks in the quest for safety and security.

A report “Opportunities in Indian Banking Sector”, by market research company, RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.

4. Education

As Education is considered as the basic necessity and in India it is seen as a long term investment by parents and with respect to the demand still there is a huge supply gap. The craze to study in foreign university among the Indian youth still alive which will prompt foreign education institute to target India provided vast young population willing to join. We will see more and more foreign educational institutions to come up in India in recent coming years.

Huge government as well as private investment is likely to flow into the Indian educational system. D E Shaw, a US$ 36 billion, global private equity firm is planning to invest around US$ 200 million in the Indian education sector.

5. Telecom

People will not stop to communicate with each other due to global crises rather it has been seen that it will increase much particularly with mobile communication. With cheap cell phones available in the Indian market and cheaper call rates, the sector has become the necessity and primary need of everyday life.

Telecom sector, according to industry estimates, year 2008 started with a subscriber base of 228 million and will likely to end with a subscriber base of 332 million – a full century ! The Telecom industry expects to add at least another 90 million subscribers in 2009 despite of recession. The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.

6. IT

Recent news shown that Indian IT sector will grow 30-40% next year. And on the other side to survive in current slowdown, industries have to decrease the cost and for that they will resort to customized IT solutions which will further boost up the software solution demand.

India is fast becoming a hot destination for outsourced e-publishing work. As per a Confederation of Indian Industry (CII) report, the industry is growing at an annual rate of 35 per cent and India’s outsourcing opportunities in the value-added and core services such as copy editing, project management, indexing, media services and content deployment will help make the publishing BPO industry worth US$ 1.46 billion by 2010.

7. Health care

India in case of health care facilities still lakes the adequate supply. In Health care sector also there is huge gape between demand and supply at all the levels of society. Still there are so many urban areas were you could hardly find any multi specialty hospital. And in case of metros the market sentiments itself created a need of psychological consultation.

Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017. The healthcare industry is interestingly poised as it strives to emerge as a global hub due to the distinct advantages it enjoys in clinical excellence and low costs.

8. Luxury products

The high and affluent class of society will not be affected much by this global crises even if their worth is reduced significantly. They will not change their life style and will not stop spending on luxurious goods. So luxurious product market will not be affected and in fact to maintain the lifestyle those affluent will spend more for it. Luxury car makers are pouring in to woo the nouveau riche (Audi, BMW are the most recent entrants).

According to recent research on luxury trends, the number of families with annual incomes of more than $230,000 will have more than doubled from 20,000 in 2002 to 53,000 by the end of 2005 and will grow to 140,000 by 2010.

9. M&A & Marketing Consultants

As in the current business slow down survival will be the main focus, the marketing and management consultants will be called for to reduce the costs and to show the ways to survive and stay in market. Others may join hands to fight with this situation together will call for the Marketing & M&A consultants. In a booming market there are growth strategies and M&A opportunities to advise on. When businesses are cutting back, consultancies will be right there to help clients decide where to wield the axe.

According to Ministry of Commerce and Industry’s estimation, the current size of consulting industry in India is about Rs.10000/- crores including exports and is expected to grow further at a CAGR of aprox. 25% in next few years

10. Media and Entertainment

In current bad times, where people are losing jobs and getting enough time to watch TV, they will seek entertainment at home and hence advertising revenues will increase for the commercial channels. Also businesses like production of religious texts and religious materials, religious channels will do well. The TRP of religious channels will increase compare to the other entertaining/commercial channels.

According to a report published by the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian M&E industry is expected to grow at a compound annual growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012. According to the PWC report, the television industry was worth US$ 5. 48 billion in 2007, recording a growth of 18 per cent over 2006. It is further likely to grow by 22 per cent over the next five years and be worth US$ 12. 34 billion by 2012.

Signs of Global Sanity? Sharing of Innovative Agricultural Solutions to Help Farmers and Consumers

Agriculture is the direct or indirect livelihood of three quarters of the world’s poor, who live in rural areas.

The 2008 food crisis and the subsequent global financial crisis, showed the extreme vulnerability of developing countries to fluctuations in food prices and supplies.

But the impact was not only on developing world farmers – it affected consumers world-wide in food scarcities, eg rice in Thailand, and higher prices.

In Nov 2008 Egypt – UNIDO (United Nations Industrial Development Organisation) sponsored the first ever international conference on Sharing Innovative Agribusiness Solutions – From Farms to Markets: Providing Know-how and Finance.

If the conference activities can be sustained it’s an initiative that would potentially benefit small farmers in developing world, consumers everywhere and the planet as a whole.

“Our vision is sustainable development”

In his opening speech Dr. Ibrahim Abouleish, Founder of SEKEM said that Sustainable development could satisfy our needs and aspirations without decreasing the chances for future generations……but that we need to learn the basic principals of ecology.

“….. Being ecologically literate means understanding the principles of organisations of ecological communities including our educational com¬munities, political and business communities. So that principles of education, management and politics include the principles of ecology.”

A little about SEKEM

In 1977 the economic and social hardship of his countrymen galvanised Social Entrepreneur and medical doctor Dr Abouleish into buying 70 hectares of desert scrubland, 60 km north-east of Cairo and close to the River Nile.

He called the new experimental farm there SEKEM – from Ancient Egyptian: “vitality from the sun”.

SEKEM was able to transform the desert into a showcase example of sustainable agriculture and a healthy ecosystem through biodynamic farming methods.

Its efforts in organic cultivation led to the conversion of the entire Egyptian cotton industry to organic methods.

Starting off with a dairy and crop farm, SEKEM soon began to produce herbal teas and to market its biodynamic produce in Europe. This initiative helped other farms in Egypt to switch to biodynamic farming. A part of its mix of activities the farm uses bio-fertilizers.

The 2008 Cairo conference brought together over 400 agribusiness stakeholders from more than 65 countries, including representatives of private and public institutions (technical and financial), international organizations, donor countries, civil society, universities and research institutions to share innovative agribusiness solutions

Topics covered supply/value chains, market access and linkages, Compliance with standards and conformity assessment, Technology and value addition and Innovative forms of financing

Participants were enthusiastic about working together to achieve change. central to the debate were “Innovation and opportunity”, “partnerships based on trust” and “the need for commitment”, also the need for a holistic approach to agriculture taking into account the needs of specific groups, and avoiding the mistake of thinking that “one size fits all”.

Four key issues were identified:

1. Financial: small producers need finance to bridge the gap between initial costs and eventual benefits to help them enhance their productivity and agricultural product distribution.

2. Up to date information: small farmers and SMEs need access to up-to-date market information to enable them to compete effectively in local, regional and international markets.

One example cited was an Indian project, an e-Choupal (“choupal” means gathering place in Hindi) programme that places computers with internet access in rural farming villages; e-Choupals acted as both a social gathering place for exchange of information and an e-commerce hub.

3. Investment in supply-chain infrastructure: Governments, the food industry, agribusiness and consumer goods retailers need to invesr in supply-chain infrstructures, which have a long economic life.

e-Choupal had a role here too: Out of an initial effort to re-engineer the procurement process for soy, tobacco, wheat, shrimp and other cropping systems in rural India grew a highly profitable distribution and product design channel for the company – an e-commerce platform and also a low-cost fulfilment system focused on the specific needs of rural India

4. Use of technology: using technological know-howfor improving yields, includingbio-fertilizers applied as soil or seed inoculants and foliar spray, reduction of post-harvest losses through better product preservation techniques, quality preservation processes and innovative ingredients to reduce microbial and toxin contamination, increased cost-efficiency related to local production, collective brands and quality criteria enhancement to strengthen small-scale producers, packaging technology and efficient logistics.

A range of follow-up activities was reportedly initiated, including a new project (supported by the Italian Development Cooperation) to extend ETRACE(UNIDO’s Egyptian Traceability Centre for Agro-Industrial Exports) activities and help other developing countries to establish similar centres.

Further follow-up initiatives will focus on promotional and outreach activities such as the development of an interactive networking and matchmaking platform for agribusiness practitioners, which will allow continuous sharing of more innovative solutions and best practices with more participants and thus foster more business and development partnerships

If the momentum from this conference can be sustained the future could be brighter for all of us, consumers and farmers alike.

Think Global Act Local: A Case Of McDonald’s Global Strategy

The impact of culture on international business, has led to the emphasis of the concept of glocalization. The following reasons, highlight the importance of adopting a strategy tailored to a particular culture in international business. This reasons are:

– International marketing scheme is affected by globalisation and cultural differences.

Cultural distinctiveness has affected strategies adopted in international management. A given strategy in a particular culture is unlikely to yield the same result in another cultural background or environment.

– An understanding of the difference between macro and micro environment has been of great help in strategies of international interventions.

– Cultural distinctiveness has a great impact on consumption of goods and services. A clear understanding of this, helps international organisations to properly analyse the market and suggest ways to properly meet consumers needs and demand.

A case study of the global strategy of McDonald’s reveals the concept of ” think global and act local” (glocalization).

McDonald’s was able to attract its French customers by introducing some local menus that suits the French taste bud. When McDonald’s first came into France, it faced lots of oppositions. The difference in food culture between the French and the Americans was very wide. The French preferred home made kind of food rather than fast food meals. Secondly the French were sentimental towards accepting the American life style. The Mistake McDonald’s made was that it positioned it self as an American fast food company, introducing American menus and way of life to the French. As a result, the French were not willing to accept its brand. Based on this, there was need for McDonald’s to restrategise. McDonald’s later discovered the importance of children in influencing family decision, and therefore, positioned itself as a family restaurant rather than a US brand restaurant. This strategy was powerful because it was the only brand at that time that recognised the family.

The moment McDonald’s started positioning itself as a place for the modern French family, it started to experience an increase in growth. This was the turning point for McDonald’s in France.

However, the success of McDonald’s was not completely smooth without hitches. In 1999, an irritated farmer named Jose Bove, began a protest against the insurgence of junk food. He took his tractor along with some other farmers and demolished the McDonald’s branch in his local area. This protest by Jose brought the attention of the French president who openly condemned the role of US within the global food industries.

The opposition by Jose led McDonald’s to adopt a transparency policy campaign with farmers to explain to them what it is doing to improve relations among them.

Secondly, McDonald’s started paying attention to local details. It discovered that the French do not have the habit of snacking. It had to adopt recipes which the French liked to its menu. It added French pastries and cakes to its menu, and this was a big boost to its sales. Also, it had to ensure that French franchise only prepare fries from a particular specie of French potato. This strategies adopted by McDonald’s made the French to accept its global brand because it had a local taste and feel.

Also, the global fast food McDonald’s, survived and grew in India by developing innovative menus to cater to Indian taste bud. When McDonald’s first came to India, it had strong oppositions from nationalist. Despite this opposition, it had a growth plan to double its turnover every three years in the next decade.

The managing director of McDonald’s in India, Vikram Bakshi, said that in order to survive in India, it had to change its strategy. Seventy percent of its product had to be developed to suit the Indian market. In India McDonald’s was very careful not to offer pork or beef based on the country’s sensitivity to these items.

McDonald’s faced a very big challenge on how to reach out to the Indian large vegetarian population, and still maintain its national brand. Hence, in 1999, it came up with a new brand of burger called the “McAloo Tikki Burger”. This burger has never been heard of any where in the world. Today, the McAloo tikki burger is the single highest selling product and one of the first product to be exported to the middle east.

McDonald’s archived its success in India and world wide because it used both global and local strategy in marketing its products. It had different designs for different countries depending on their culture, as in the case of India.

McDonald’s also takes into consideration the laws of the country they find themselves. For example, in Spain beer is sold in McDonald’s outlets, while in Great Britain it can’t because it will need a separate license to sell alcohol.

This case of McDonald’s shows that in order to succeed globally, intercultural differences should be taken into consideration in the strategy adopted by international organisations.

In conclusion, cultures affect the strategy adopted by international organisations. These cultures vary, therefore the strategy adopted in country A should be different from the strategy adopted in country B.

In addition, global brands has been able to evolve cultures to a certain degree, and cultures has in turn, affected the nature of global brands.

In line with this, people hold certain element of their culture in high esteem and are not willing to let go of it. However, they are willing to accept foreign influences only if it is able to portray certain aspect of their culture, making them have a local feel.

As a result, for international organisations to succeed globally, it is important to pay attention to local needs, while maintaining a global brand.

Therefore, as you deploy a market entry strategy into foreign markets, it is important to adopt the concept of “think global and act local”.

Prevent These Business Mistakes With the Right Global Markets Reports

Information, is the most important term in business – it’s what you need to stay ahead. Using the global markets reports related to your business, you can assimilate all your resources and use them effectively.

Business experience might not be enough to propel your brand into the market, or a new one at that. Data also needs to be utilized in a way that it creates a constant flow of solutions. It&rsquo’s important to gain a better understanding of your buyer, competitor and market – or what it really takes to stay competitive. Without the right ideas, answers and information at your disposal, you could find yourself facing these issues:

Maintaining over-optimistic strategies:

Most entrepreneurs start out with and noble idea of where they want to take their brand and often get carried away. Exemplary planning, without adequate research to support it, could destroy your business entirely. This is because, in addition to developing a really good business idea, you have tested out its viability – preferably before you set up your business.

Research will help you to understand the level of customer expectations or type of needs they have. It identifies the right product testing tools you should be using and ways to factor in the feedback or results of these preliminary tests.

Avoiding collaborating over business ideas:

A business idea cannot come into play overnight. You have to invest the right amount of efforts in sharing it with partners, colleagues and even customers. This is where you will find the suggestions or opinions necessary, to improve on your idea or find new ones altogether.

That being said, it’s important to share your prototype or idea with trustworthy people. You also need to understand how to protect your ideas from being stolen or being used in unscrupulous ways.

Not understanding your customers or market:

The biggest danger of overlooking research is that you end up selling your product in the wrong markets. You wouldn’t even know how strong your competition is, leading to the untimely failure of your product.

To prevent this, you can use research reports to gain access to data on government laws, social norms for developing your own business networks. You can even get an understanding of the sector you are in to discover prevalent purchasing trends.

Bad or inadequate financial planning:

Business capital is important too. The reluctance to prepare yourself with the right amount of it and have contingency plans ready could lead to a lot of problems. It might even prevent you from taking an idea forward, even if happens to be a very viable one.

Capital is what will help your brand to survive and shows that your business has a future. This is one part of your business plan that will appeal to investors, should you choose to look for any. Research report data is what you can use to structure your financial objectives. It identifies damaging situations that could lead to a negative result such as inflation rates, political instability and ways to resolve them.

Trump Wins Trade War As Global Markets Plummet

It is early July, well before this article goes online, yet the landscape is pretty clear from where I stand. The U.S. and China both raised tariffs on $34 billion worth of goods Friday, July 6. This did not deter the S&P 500 from continuing its charge up to the January 26 all-time high. To boot, unemployment is historically low and the Fed is set to raise rates twice before the year ends – all this amidst a stealth discretionary spending recession.

So, how about that trade war? Let’s recap. Most folks would agree that the free trade of goods would be best for all concerned. Goods would be less expensive and those that could not compete on price would do so on quality, leading to a beneficial improvement of goods. All is well and good until protectionism and nationalism rear their ugly heads. Some nations have goods that find it difficult to compete on the basis of price and/or quality. Globally, world leaders of such nations are unapologetic in pursuing their nation’s interests at the expense of others. In trying to avoid the image of the ugly American, we have often placed ourselves at a disadvantage. Nowhere is this more evident than in trade were our trading partners often have a clear advantage.

U.S. Census Data shows that we have a trade deficit with every trading region except for South and Central America and Australia/Oceania. At only $33.14 and $14.38 billion, respectively, the last four years and a combined trade of $310.44 billion this pales in comparison with the deficit for the rest of the world, -$844.66 billion, whose combined trade is $3.578 trillion. Below are 2014-2017 averages for most of the world in billions:

Canada: -$20.01

European Union: -$149.61

Asia: -$547.49

Africa: -$2.60

China is a case in point. Aware of the huge financial benefit that comes with their 1.38 billion consumers, they extract huge concessions from their trading partners, including the U.S. When they have not barred certain U.S. business sectors, they restrict or regulate business, place tariffs on goods, or coerce intellectual property release. Note this goes one way; there is no intellectual property sharing.

These noncompetitive business practices are not fair, but until now, U.S. companies have accepted them without much push back as the cost of doing business there. That is until Trump. What Chinese leaders need to realize is that they are not in a good bargaining position and the longer they hold out the more harm will come to their economy.

Here is why. Leaders of the government-run economy are well aware of their history and realize the huge Chinese population is not going to put up with poor conditions forever. To keep discontent at bay, they have a policy of inflated economic growth. According to Trading Economics, they have averaged 11.7% GDP growth for the past 10 years but chinks in their armor are showing. From the 2010-2011 heyday, where GDP grew 19% and 24%, growth has dropped steadily and sometimes precipitously. It was 5.56% and 1.14% in 2015 and 2016, respectively. Little wonder that worried central government figures have made a big push since then for increasing their global exports, including those to the U.S., resulting in a resumption of GDP growth to 9.35% in 2017. The prospect of increased tariffs, which would make their goods less competitive, runs afoul of those plans. China’s economy is struggling and their stock market is testament to that. The smaller Shenzhen composite moved into bear market territory in February and the Shanghai composite closed in bear territory on Tuesday, June 27. The indexes went as low as -26.5% and -25.0 on July 5 but have recently recovered to -22.5 and -21.2%, respectively, as global markets have climbed in tandem with U.S. markets. That is still in bear market territory, which will curtail much need foreign investment. Meanwhile, U.S. GDP is growing steadily, the economy seems to be healthy, and the stock market is nearing new heights. Trump can ratchet up the tariff game longer knowing he has more economic wiggle room. Moreover, he can inflict more pain to the Chinese economy than they can to ours.

To see why, let’s look at the trade numbers. The trade deficit with China has averaged -$358.68 billion the last four years in a rising trend. While U.S. exports have vacillated between $110-129 billion since 2012, Chinese imports have steadily increased from $315 to 375 billion. Last year the deficit was -$375.58 billion, of which $129.89 billion were U.S. exports to China and $505.47 billion were U.S. Chinese imports. Not only is trade unbalanced, so are tariffs. Prior to this year, U.S. tariffs on Chinese agricultural and non-agricultural goods were 2.5% and 2.9%, respectively, while Chinese tariffs on U.S. goods were 9.7% and 5% for the same. True, these had been going down from a 14.1% average prior to 2001 when China joined the World Trade Organization but that was part of the price and tariffs are much higher for some industries.

Below are the top 10 U.S. exports to China in 2017 according to the International Trade Centre Trade Map http://www.intracen.org/marketanalysis:

Aircraft, spacecraft – $16.3 billion

Vehicles – $13.2 billion

Oil Seed – $13 billion

Machinery – $12.9 billion

Electronic equipment – $12.1 billion

Medical, technical equipment – $8.8 billion

Mineral fuels including oil – $8.6 billion

Plastics – $5.7 billion

Woodpulp – $3.4 billion

Wood – $3.2 billion

Total – $97.7 billion

Together they account for 74.8% of all exports that year. Note that except for oil seed, mostly soybeans, the rest are non-agricultural products. But their tariffs are not the same and depend on how strategic the product is. For example, Chinese cars cannot compete with American ones so the latter have duties ranging between 21% and 30%. Compare that to a maximum of 2.5% for Chinese car imports to the U.S.

Therein lies the rub. The Chinese can only raise imports so much more on these goods, some of which have few suppliers outside the U.S. As a result, some of the announced tariff hikes are empty rhetoric with few teeth. Just as an example, China announced 25% tariffs on aircraft, but not all aircraft – just those with an “empty weight” of 15,000 to 45,000 kilograms. While it may seem like China is taking aim at Boeing, it turns out the stipulations only target older 737’s being phased out of production, while not touching the larger models comprising the bulk of Boeing’s trade. China desperately needs to grow their airline industry. It is estimated 7000 new planes will be needed in the next 20 years. With Airbus working at near full capacity, there is no alternative but to turn to Boeing for the remainder.

The same goes for soybeans, the bulk of Chinese agricultural imports. China is the world’s top pork market and they need soybeans for feed. It turns out Brazil and the U.S. are the top two global soybean suppliers. Brazil has been cranking up production for years and now constitutes 57% of Chinese soybean imports. This came mostly at the expense of the U.S., but Brazil does not have the capacity to make up for the remaining 31% in U.S. soybean exports to China. As a result, the planned 25% increase in tariffs will hurt Chinese pork farmers directly.

Ultimately, the sheer size of the trade imbalance will play in Trump’s favor. With $500 billion dollars of goods at risk for China vs. only $130 billion for the U.S., China’s fate is sealed. That is, provided Trump is persistent in raising the bar while keeping disgruntled American businessmen at bay. Historians may recall a similar unrelenting raising of the bar eventually caused Russia to capitulate during Reagan’s tenure. It does not help China that it is already running up against its tariff limit.

We are already seeing that endgame play out. Just four days after both countries raised taxes equilaterally, Trump announced 10% tariffs on $200 billion in Chinese goods. There was no equilateral retaliation China could muster after the late Tuesday, July 10 announcement. Instead, China announced it would hit back in other ways – probably by selling U.S. Treasuries, which would flood the medium- and long-term bond market causing bond prices to fall and yields to rise.

Regarding the latter, Trump’s victory will come at a cost. Bolstered by his success with China, Trump will continue to pursue his trade normalization agenda with other trade partners. Although trade is fairly balanced with the U.K., the European Union had a $173.58 billion trade advantage last year on a $839 billion trade. Not only that, but the E.U. has made it a habit to go after American tech giants it cannot compete with. Think Qualcomm in 2018, Google in 2017, Facebook in 2017, Apple in 2016, and Microsoft in 2013. Japan is on the same boat. Our deficit with Japan averaged -$68.59 billion from 2014-2017 and stood last year at -$68.88 billion on a $204 billion trade. Although government regulations have eased under Prime Minister Abe, Japan has a culture of impeding foreign investment, particularly in the financial sector. Moreover, they have high tariffs on dairy (up to 40%) and meat (38.5% on beef) products, which account for $6.1 billion of U.S. exports to the country. Trump has made it clear they are also in play and they have fired salvos in return.

Given the posturing by all parties involved, tariffs will be higher going forward than they were before. This will raise the price of U.S. goods abroad, making them less competitive. This will, in turn, impact earnings for our larger, international firms. Our stock market may be flirting with highs right now, but I believe this will be the catalyst to the market downturn as Investors, looking ahead, bid down these stocks. Moreover, tariffs on imports will inevitably lead to inflation. We are already at the Fed’s 2% comfort level so any visibility on higher inflation will incite the Fed to head it off by hiking fed funds rates beyond their current path. Their incentive to do so will be bolstered if China retaliates with a Treasury selling program, as higher 10-year Treasury rates relieve the Fed of yield curve inversion worries.

A stock market downturn will reverse the wealth effect we have been seeing recently on our economy and combined with export losses, this undoubtedly will lead to job losses and higher unemployment. On top of all that, the stealth discretionary recession we have been experiencing, will make itself clearly evident as U.S. peak spender populations continue to decline all the way until 2023. This is not an incident unique to the U.S. World population growth increased from 1946 to 1968, peaking at 2.09% per year that year, coinciding with the bulk of our Baby Boomer bulge. Since then it has been steadily decreasing until it reached 1.09% at the beginning of this year. Peak spenders are those 46-50 years old and if we take 1968 as the mid-point of their population zenith, they topped out in 2016. That is a main reason populous nations, like China, have been concerned with slowing consumerism the past couple of years. The upshot is we will see a global drop in discretionary spending for at least the next five years. This will result in an accelerated global economic downturn for the next five years and plummeting global stock markets for the next few years.

The Cure For America’s Economy is to Mainstream a Global Mentality

America’s financial and economic wizards know the world is global but America’s mainstream lags behind. Money news programs such as Jim Kramer’s Mad Money demonstrate daily that stock markets are interdependent, currencies interlinked and commodity prices volatile with their dependence on human factors such as politics as well as on environmental events. Those variables affect business and trade but are not reflected in mainstream news coverage, which leaves the mainstream investor, small business owner and even ordinary job-seeker at a considerable disadvantage.

Most large city American newspapers have separate international and national coverage, as do the New York Times and the Chicago Tribune. The tabloid New York Post, however, does not, nor does the Chicago Sun Times. Smaller city newspapers such as Indian’s Hammond Times carry little news about the world other than major coups, catastrophes and notices about locals in global combat zones.

As a result, the New York Post on Thursday, July 2, as an example, headlined with the recently deceased Michael Jackson, control of local schools and a Yankee baseball team win. Inside stories of international events covered the young French survivor of a plane crash off of the Comoros Islands in the Indian Ocean and an affair between an American state governor and an Argentine mistress. A coup in the Central American country of Honduras received six short paragraphs at the bottom of page 19. Editorials covered Afghanistan and Iran. Marketwatch in the Business section cited nine worldwide indexes, the majority European, while the Foreign Exchange Hotlist cited 17 majors among the world’s 200 countries.

In contrast, Google News that day reported also on Israel, North Korea, Iraq, Indian, Russia, Pakistan, the European Union through Sweden’s newly assumed presidency, the International Atomic Energy Agency, Sri Lanka, Croatia, an African Summit in Libya, France and the question of the Muslim women’s burqa, and finally, the former Soviet satellite country of Georgia.

Throughout the unprecedented global economic crisis of the late first decade of the twenty-first century in which a western industrialized country elected a first nonwhite leader to meet the challenge, the lack of “consumer confidence” was cited as the cause for the continued stagnation of the American economy. Yet in a global world where financial insiders trade on the basis of interdependence, can national “consumer confidence” exist without a broader mainstream context?

American consumers responsible for the robust purchase of products to stimulate the economy through imports, exports, corporate expansion and small business investments, have small chance of resuming their role without a basis for their “confidence” being restored following the crises of American financial institutions and the ensuing bailouts that began with the last conservative administration before the new liberal one went into effect. With trust in the “system” shaken to its core by mortgage defaults stemming from unregulated and unscrupulous banking practices as well as predator banking, in addition to an ill-founded war on the foreign country of Iraq, American consumers are in sore need of reassurance about America’s abilities in a global world, a situation that was a call for the mainstream media to adapt and provide the “medium” circulating pertinent and relevant “news” to the American people.

In a global world, “news” is no longer defined as “man bites dog” versus the other way around. In a world of 200 countries all interlinked, “news” equates with information that is novel, useful and conducive to exchange between little-known neighbors with whom to establish business arrangements for mutual benefit to stimulate growth.

News about the world abounds on the Web but America’s mainstream deserves better than needing to put extraordinary effort into being informed. The mentality of a world leader derives from the “matter of course” attitude with which informed citizens regard the world by knowing its source of information has a finger on the pulse of the world’s workings.

Live a Travel Channel Life – 5 Tips For Global Nomads

There is a growing number of people around the world throwing their cares to the wind, quitting their jobs, and making a new life for themselves on the open road traveling from country to country. Whether you are making an all-out lifestyle change or easing into it a little at a time, there are tricks and techniques for doing it right.

To life like a star of the travel channel, try these 5 tips:

Tip #1: Carry only the essentials from country to country:
When you embark on your journey, you may find yourself packing two nice, big suitcase full of clothes and goodies from REI. Hint: try narrowing your luggage down to what will fit in a backpack or a single suitcase. Either way, as you travel from country to country, you will notice that your list of essentials grows shorter. All you really need is a bit of cash or travelers checks, your passport, maybe a good travel guide and a couple changes of clothing.

Tip #2: Buy cheap:
If you are going to make a life or significant hobby out of living the travel channel life, you need to learn the insider secrets to buying cheap airfare. Do the research ahead of time. For you, airfare will become as significant an expense as is a mortgage and car payment for your more sedentary friends and family. Do your homework now and save thousands and thousands down the road.

Tip #3: Know the best countries to visit for saving your cash:
As you can imagine, the cost of traveling and living in the various countries of the world differs dramatically from country to country. If you are planning to life for months or years away from home, plan your global route according to your budget. For example, if you are planning to travel Asia, visit South and Southeast Asian (e.g., India, Thailand, and Vietnam) when you are low on cash. If you just made a withdrawal from the bank account in your native country or got a paycheck from your online business, head to East Asia (e.g., Singapore, Hong Kong, and Japan) to see the sites there. The same pattern applies in the Americas, Africa, and Europe as well.

Tip #4: Double up when you can:
If you are traveling along, you will find that it is usually very easy to meet people on the road. When you do have the opportunity to meet up with someone you can trust with whom you can share accommodations or even a taxi ride to the airport, I highly suggest doing so. At the same time, you will need to say goodbye to these travel bodies not infrequently, so be big enough to say “I have to go my own way now” then the time comes.

Tip #5: Use Internet cafes to maintain a travel blog:
Traveling this big world can be pretty lonely sometimes. A great option that global travelers have today that was not there even a few years ago is to keep a travel blog. Your regular entries of text and (when possible) photos will give you a sense of continuity and will give your friends and family back home a much better sense of what is going on with you as you have the time of your life.

To live a travel channel life, make sure you educate yourself about how to buy cheap airfare and accommodations. Be sure to pack only the essentials and educate yourself ahead of time about which countries will be cheaper to live in. And, take advantage of the Internet to keep yourself centered and your family and friends up to date.