Low Cost Commodities and Emerging Economies
By: Amit Bhushan Date: 12th Jan. 2014
The low cost commodities will have its repercussion on the direction of investments and development. The political powers in the emerging markets that were focused on consumer infra like metros on the back of commodities exports will now be forced to focus upon industrial infra. This is because as exports dry and the announced infra projects start shedding employment, they will need to back this up by getting the domestic manufacturing to absorb the surplus labour. This is especially so when these markets have recently faced political turmoil and the leaders are under tremendous pressure to respond to changes with suitable policy measures rather than 'old ways'. Therefore a prudent focus on growing manufacturing as well as services basis competitiveness would be weighed by the leaders and oil rich nations may not remain untouched.
This is likely to have some repercussions on manufactured exports of both developing as well as developed countries with shifting focus on exports of manufacturing projects / investments and collaborations. The appetite of developed world especially Europe and Japan to resist such change is very little (since the markets now need to be protected rather than allow shrinkage) while Chinese manufacturers will need to follow suite in response to changing markets. This is even as the focus in India as well as most other emerging markets seems firmly on 'Make in India/Domestically (in respective countries)' as far as the focus of Government's efforts is concerned, it is the 'Services capability development concerns' viz. Software consulting as well as Technology exports which are more likely to be the focus of emerging economies who need to develop domestic service industry capabilities in the short to medium run while infra and policies for product manufacturing as well as raising sophistication as well as quality of domestic demand may take some time and be a medium to long term project for leaders in these countries.
While the global investment as well as commercial banks seems eager crowd to fund these manufacturing efforts which are more visible, however their focus to grow the domestic service industry capabilities seem to be minimum. A reason could be pertaining to domestic laws as well as on the questions of 'dirty monies' whose routing back to emerging countries may have ramifications. Another is the impact such growth of domestic service industry could have on offerings of these investment banks or commercial banks. For example: rise in capabilities of middle eastern banks may upset global banking or investment portfolio management or Insurance firms as consumers from these countries stop flocking to foreign banks or Insurance firms for such services and impact global fund flows. Similarly a focus on luxury goods manufacturing within Middle East or mass goods manufacturing in say Argentina or Nigeria may create new trading order in these regions. The focus on development in countries like India, Indonesia etc. has to keep in mind the emerging scenarios and their impact while pursuing the development agenda.
By: Amit Bhushan Date: 12th Jan. 2014
The low cost commodities will have its repercussion on the direction of investments and development. The political powers in the emerging markets that were focused on consumer infra like metros on the back of commodities exports will now be forced to focus upon industrial infra. This is because as exports dry and the announced infra projects start shedding employment, they will need to back this up by getting the domestic manufacturing to absorb the surplus labour. This is especially so when these markets have recently faced political turmoil and the leaders are under tremendous pressure to respond to changes with suitable policy measures rather than 'old ways'. Therefore a prudent focus on growing manufacturing as well as services basis competitiveness would be weighed by the leaders and oil rich nations may not remain untouched.
This is likely to have some repercussions on manufactured exports of both developing as well as developed countries with shifting focus on exports of manufacturing projects / investments and collaborations. The appetite of developed world especially Europe and Japan to resist such change is very little (since the markets now need to be protected rather than allow shrinkage) while Chinese manufacturers will need to follow suite in response to changing markets. This is even as the focus in India as well as most other emerging markets seems firmly on 'Make in India/Domestically (in respective countries)' as far as the focus of Government's efforts is concerned, it is the 'Services capability development concerns' viz. Software consulting as well as Technology exports which are more likely to be the focus of emerging economies who need to develop domestic service industry capabilities in the short to medium run while infra and policies for product manufacturing as well as raising sophistication as well as quality of domestic demand may take some time and be a medium to long term project for leaders in these countries.
While the global investment as well as commercial banks seems eager crowd to fund these manufacturing efforts which are more visible, however their focus to grow the domestic service industry capabilities seem to be minimum. A reason could be pertaining to domestic laws as well as on the questions of 'dirty monies' whose routing back to emerging countries may have ramifications. Another is the impact such growth of domestic service industry could have on offerings of these investment banks or commercial banks. For example: rise in capabilities of middle eastern banks may upset global banking or investment portfolio management or Insurance firms as consumers from these countries stop flocking to foreign banks or Insurance firms for such services and impact global fund flows. Similarly a focus on luxury goods manufacturing within Middle East or mass goods manufacturing in say Argentina or Nigeria may create new trading order in these regions. The focus on development in countries like India, Indonesia etc. has to keep in mind the emerging scenarios and their impact while pursuing the development agenda.