The year that slipped by proved most political and economic pundits wrong.
From the global perspective, recession continued its stronghold in most countries of the West, most businesses struggled to meet rising costs, cash flow became a major issue and unemployment rose to levels not seen in recent times.
The retail sector had little to cheer. A majority of consumers were weary of spending, due either to a lack of funds or preferred saving. The property market remained depressed and the declining prices in some areas did not encourage higher sales.
Corporate failures, including those of many international financial institutions, remained a major worry.
The East-West divide appeared to have widened, with China and India emerging as the two biggest economies, with unmatched record in fiscal spending, infrastructure development, manufacturing and international trade. Their retail sector remained robust and wealth creation was at its best even in the worst of times that the rest of the world witnessed.
In short, 2010 would remain as a bleak year in recorded history.
Old & New Masters
Changes in economic order have ushered in a new era of new masters who will rule the economic world for a while. China and India have distinguished themselves as major producers, consumers and manufacturers that the world has not seen before. Ironically, the two countries were, until 20 years ago, true disciples of socialism and the best examples of insulated economies. Suddenly, their huge population has become a major global asset. While most of the western world has to grapple with the problem of ageing population, India could be the supplier of human capital over the next five decades with its extremely young men and women with the requisite skills.
The rich world will continue to suffer from anaemic growth for years to come. The emerging world, by contrast, will be a whirling hub of dynamism and creativity. Over the next 15 or more years, it will account for more than 50% of global growth. It will see 700 million people enter the middle class and account for a disproportionate share of business innovations.
According to the Economist, businesspeople will increasingly debate about the markets that should hold their attention. Should they be the BRIC bloc, comprising Brazil, Russia, India and China, dubbed so by Goldman Sachs or some of the ‘overlooked markets’ of Africa? These should include South Africa, Egypt, Algeria, Botswana, Libya, Mauritius, Morocco and Tunisia. Collectively these countries match the average GDP per head of the BRICs.
Turkey & Saudi too
The publication rightly mentioned about the overlooked emerging giants in every corner of the world. In the Middle East, Turkey and Saudi Arabia will attract a lot of attention. Turkey is one of the world’s most dynamic economies (and certainly more dynamic than its ancient sparring partner, Greece). Saudi Arabia has been liberalising its business environment rapidly, according to the World Bank’s annual “Doing Business” survey. In Latin America, people will take another look at Mexico for its successful companies and thriving middle class.
“But the biggest praise will be for Indonesia: it will be the emerging-market star of 2011, with analysts lauding its innovative companies, growing middle class and relative political stability,” the Economist said.
In our view, most of the emerging markets would have to put their house in order before taking on the world. China must learn to be more transparent and tolerant, in the context of its own affairs and understand the philosophy of openness in the global village. India should treat its cancerous growth of corruption at almost all levels of governance if it has to attract foreign investment and remain a world economic power.
These and other issues will raise their heads in the New Year.