Commonwealth Growth and the UK

2012 has started with the same economic uncertainty that 2011 ended with and the UK needs to look for Partners around the world that are growing fast that can supplement the UKs existing relationships in Europe and US. The Commonwealth’s emerging markets are the obvious choice, our pre-existing relationships make doing business together easier and similar institutions and business methods can bring the cost of doing business down by up to 20%. Most Commonwealth Countries will grow at over 5% this year and all represent colossal opportunities for British companies.

Historically, Britain used to count countries such as New Zealand, India, Australia, Singapore and Canada among its leading trading partners.

Since joining the European single market, Germany, France, Holland and Belgium have assumed far greater importance to us while only five Commonwealth countries struggle to make it onto the list of top 25 export destinations.

However times could be changing. The latest overseas trade statistics show the biggest increase in exports are to our Commonwealth partners and if trends continue they are set to play a far more important part in our economic life.

In the 12 months up to the end of September our exports to India – roaring ahead with 9% growth – increased by a whopping 33.5% compared with the same period a year earlier.

Exports to Canada jumped 18.3% in the same period and those to Australia were up 30% while those to South Africa rose by 31%.

These are good improvements but there is massive potential in the Commonwealth and Britain should be at the forefront taking advantage of it.

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.

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.

The UK Election and the Economy

A recent article in the economist made some concerning comparisons between the UK's recovery from the recent financial crisis and Japans recovery from the Asian banking crisis in the 1990s. The report compared the 2 countries of level of indebtedness and found them similar; it also stated that Japan has never really recovered from its economic momentum since the crisis.

I agree with the Economist that this is an unlikely outcome for the UK; I have a lot of faith in the UK's businesses and entrepreneurs to find a way to stay profitable and keep growing. However this growth can only be assured if business and the wider economy are supported by the government. With elections fast approaching and the outcome more uncertain than in recent years there are signs of fear in the stock market and public anxiety around a hung parliament.

This is the worst time for British politicians to try to learn the art of government by coalition and compromise when the economy is still in need of strong leadership and decisive action. Whatever the form of the next British government takes it must be able to act rapidly and with conviction.

The polls are suggesting the Liberal Democrats are doing better than ever before, this must surely increase the chances of a Hung Parliament. I hope that any coalition Government can quickly form a consensus on the direction of Britain's economic recovery, and the parties' inability to agree does not prevent a return to sustained growth. I was surprised that Nick clegg still feels that Uk should join Euro. It would have been a disaster for Uk if it had joined Euro. UK is much better outside Euro so that it can control its monetary policy as Uk's Economy is very much linked to global economy. Singapore ,a much smaller country and economy, is in the same position and is able to see high growth as it controls its own currency.

What ever the outcome of the elections i hope politicians of all parties will be more honest with the public about the state of economy and the need for structural reforms to return to economic growth and to balance the economy between various sectors and particularly to increase the role of manufacturing. Hard decisions will need to taken sooner than latter particularly in balancing the reduced role of government and recovery of the economy.

India's second tier cities

I was in India earlier this month, as well as visiting the major business cities I spent time in some of the ‘second tier cities‘, Ahmadabad, Chennai and Kochi. What I noticed most of all was how well the infrastructure in these cities is developing to handle the increase in business there.

In Ahmadabad in particular, a city once renowned for its cost saving, the business district’s skyline is becoming more and more impressive. Business in these cities are following in the footsteps of the bigger cities and becoming more like their western counterparts, adopting western style business structures and marketing strategies. Where business were once housed in old building to avoid costs, they are becoming more and more willing to undertake the often extravagant costs of moving to high end, high tech office spaces with the view it will help get the next order and allow them to compete with rivals. This change in attitude should help make India’s second cities more competitive and drive forward their growth.

Encouraging signs in Malaysia

Last week I was in Kuala Lumpur, Malaysia to continue talks with Prime Minister, Najib Tun Razak, started at CBF in Trinidad. I had a very good meeting especially coming at a time when the economy is showing encouraging signs of growth estimated to be 5% for the coming year. The main theme of the discussion was on the Prime Ministers views on the return to global growth particularly through emerging markets like Malaysia. The Prime Minister told me that Malaysian Companies are becoming more and more active in other Asian Countries, particularly China, India and Indonesia.

The British High Commissioner to Malaysia, Boyd McCleary, confirmed the importance of the Malaysia to the developed world in the wake of the Financial Crisis, more and more British companies have a growing presence in Malaysia.

I met with a number of prominent Malaysian business leaders during the trip; they all expressed similar optimism and described growth plans for the coming year, from plantation projects in Indonesia, rural Malaysia and Nigeria to exporting the Malaysian experience in world class Infrastructure development to other markets, such as India. Malaysian companies are expecting real growth this year.

India - economic optimism for 2010

After returning from India last week, one of the main differences in the conversations going on between business here in the UK and in India is the way growth is discussed. In the UK the talk is of recovery, in India the talk is all about how much the economy will grow this year. Discussion in India is optimistic, rather than the UKs current trend of Pessimism. The Federal Government of India is Predicting a return to growth of around 7% this year. The Chairman of ICICI bank is even more optimistic predicting India’s growth rate to be at 10% by 2011.

Much of this optimism comes from the changes we see in India, firstly the county never entered recession as the West did, there was only a slight drop in Growth. Secondly, the improvements to the country’s infrastructure are dramatic; the road network for example is almost unrecognisable from only 15 years ago. Entrepreneurs across the county are all looking for new opportunities, both national and international and the demand for luxury consumer goods in India is increasing year on year.

Ironically there is talk of Bonuses in the Indian Media, but it’s not focused on Bankers, rather IT companies. The rate of Growth in the IT sector has been much higher than expected over the last year, Tata Consultancy for example plan a 150% bonus pay out for 2010.

They are not the only company in the sector revealing higher than expected profits, nor is the IT Sector alone in displaying stronger than predicted results, the economic prospects for the coming year in India look great.