Thursday, 29 July 2010

Singapore a world leader

Further evidence of the global economies shift to the East has emerged. Singapore, one of the Commonwealths most developed nations, has released record breaking growth rates, for the second quarter of this year the country grew at 19.3%, the fastest rate of growth since records began in 1975. Singapore's remarkable record in the IFC’s Doing Business Index is not merely coincidental to its exceptional level of growth. The city state is the most business friendly county in the world, this is an example that both developing and developed countries will need to follow if they want achieve any level of growth let alone 19.3%.

Following Singapore's example of how a small state can grow to become a world player is an aspiration I have seen a lot in the commonwealth's developing nations aim to become regional players. Singapore is a financial hub for Asia and can act as a gateway for other Commonwealth countries to access its non-Commonwealth neighbours in the region, this is an example countries would like to replicate.

When Singapore is displaying growth rates of this level and many of its regional neighbours are growing at rates of 10% or more, it is no wonder that Asia is of ever increasing importance to the global economy.

Thursday, 22 July 2010

CBC - ICICI Dinner

Last week I had the pleasure of Hosting Ms Chanda D Kochhar, Managing Director & CEO of ICICI Bank for a dinner with leading Indian and British business leaders in London. She made a series of extremely interesting points during her speech.

Firstly it was noted that now was the time for India to take centre stage, that its annual growth rates exceeding 8% put the country at the forefront in the Global economy and that Indians themselves believe it is there time. Ms Kochhar also argued that for the current growth rate to be sustainable over the coming years the Indian banking sector would have to grow by about 20% a year, this would mean the banking sector increasing in size by 2.5 times over the next 5 years.

Ms Kochar also drew an interesting parallel between the western economies and India. She suggested that the while stimulus packages had been needed in the west to preserve growth and stave off recession, in India all the investment is demand led. "as bridges and roads are completed they are filled with traffic" she said. 'The need for infrastructure for a development is currently a real opportunity, but left un-tackled will become a serious bottle neck to Indian growth', she added.

Ms Kochar made one final 'mind boggling' observation, that by 2020 India would be home to 25% of the world's work force. India will continue to benefit from the demographic dividend until 2040, which will be the first point at which the median age of the population exceeds 32, a benefit China does not share. With such a large part of the population in the working age group, India can expect to enjoy a long period of increasing domestic consumption and prosperity.

The strengths of the Indian economy Ms Kochar highlighted, clearly demonstrate just how important India is becoming to the global economy. And indicate the level of opportunity available to the international investor looking to invest.

Friday, 16 July 2010

India, Africa and employment

An interesting report by the Oxford poverty and human development inactive was recently released that found that there were ‘more poor’ in India than Africa. This doesn’t surprise me as much as it seems to have others, while India has made improvements it has never rated highly on the UN’s Human Development Index, India ranked 134th out of 182 countries in 2009.

What occurs to me, is the similarities between the areas of high poverty in India and Africa. Outside of the urban poor, the areas with high levels of poverty are predominantly regions with large deposits of natural resources and areas of with high levels of agricultural fertility, that still operate some form of feudal system.

The reasons for poverty are the same the world over and many of the solutions can be applied globally. Investing in agriculture will allow farmers to move away from subsistence to commercial viability. Resource companies are not ‘good’ job creators, so they must be pushed to downstream and help create the support industries that will provide employment in resource rich regions.

Poverty will only be tackled successfully where government works in partnership with the private sector. Government must provide a regulatory and tax environment that stimulates economic activity. While the private sector must take advantage of this and provide employment along the length of the value chain.

Monday, 12 July 2010

UK aid commitments

I support the UK’s International Development Secretary, Andrew Mitchell’s decision to relook at the at the UK’s aid commitments to the BRIC countries (Brazil, Russia, India and China). This money can now be shifted more towards countries with a greater need, and less ability to help themselves.

Also, I again urge the Minster to examine the way in which aid is spent, there must be a shift over the next few years to aid that supports growth and aims to increase the involvement of the private sector, allowing national governments to pay for their own social infrastructure. While the shift cannot be uniform, many of the poorest countries will still need support in social areas; there are other middle income countries that can begin the shift towards growth centred aid, so that they may hopefully follow in the BRIC’s footsteps.

Friday, 9 July 2010

Vince Cable's Industrial Policy

I am pleased to note that Vince Cable the UK’s new Business secretary is adopting a more market orientated industrial policy than we have been used to in recent years. Mr Cable has describe an industrial policy that funds public goods such as, research, education and infrastructure but does so in a way that is market led rather than state led.

While recognising that the state has an important role in supporting areas and sectors where the UK has a competitive advantage, Mr Cable is rolling back the support offered to individual firms and factories. Instead the department for Business favours investing in the support for increasing the UK’s human and intellectual capital. In the long term backing training and research in the UK is the only sustainable way of increasing employment and growth in the UK.

Vince Cables Business Department is also continuing the push to force the nationalised banks to increase their levels of lending, this is very welcome. The current lack of available credit in the UK economy is stifling the Critical SME sector that will be vital for bringing down levels of unemployment.

Vince Cables new approach to Industrial policy in the UK is very welcome as it positions the private sector at the heart of the British economy while not forgetting the important areas in which the state needs to support the wider economy.

Friday, 2 July 2010

Make Poverty History through Trade and Investment

Make Poverty History is an idea that has been picked up by nearly every agency working in developing countries whether they are charities, NGO’s or development agencies. However the slogan has become so closely related to charity and foreign aid, that I fear the wider picture has been forgotten. Make Poverty History is even more relevant for the Growth agenda, for CBC we are trying to make poverty history though trade and investment. I am glad to support the work of the multi party parliamentary group, Trade out of Poverty, who are dedicated to this agenda and aim to help the world’s poorest countries trade their way to a better life.

It is my feeling that we too often forget that the only sustainable way to eliminate poverty is to ensure that the local government is responsible for its achievement. This does not mean that we don’t have a responsibility to eliminate poverty, quite the opposite; I feel it is all of our responsibilities to support the governments in their mission to eliminate poverty.

Growth is the only tool that can eliminate poverty, aid alone will never achieve this, and developing countries must develop their economic infrastructure, which will in turn increase their tax revenues allowing greater investment in the engines of growth. It is the responsibility those outside the country to support the government’s efforts in this regard, whether it be refocusing aid to help in the strengthening of business environment or facilitating private sector investment in big infrastructure projects.