A World Dancing To Energy’s Tune
The Wall Street Journal Online
The Morning Brief, a look at the day’s biggest news, is emailed to subscribers by 7 a.m. every business day. Sign up for the e-mail here.
Energy-security worries have long headlined policy confabs, political promises and investor worries. But this week — even beyond dialogues at the White House and Davos — happens to be a good time to watch some of the subject’s geopolitical algorithms at work.
For instance, Chinese President Hu Jintao is a man whose government doesn’t often feel the need to justify its actions. But there officials were yesterday, defending Beijing’s economic ties to Sudan ahead of an African trip by Mr. Hu that includes a stop in Khartoum, as the Financial Times reports. Mr. Hu’s visit comes at time when China has broken with the U.S. and Europe over attempts to make Sudan let U.N. troops help quell the violence in Darfur. But Foreign Ministry official Zhai Jun made clear his government sees nothing shameful when it comes to Sudan. “With Sudan we have co-operation in many aspects, including military cooperation. In this, we have nothing to hide,” he said.
China, whose petroleum thirst played a big role in the rising price of crude over the past four years, gets almost a third its oil imports from Africa, as well as other raw materials. (The latest attack on a Nigerian oil facility — today in Bayelsa state — didn’t target Shell, but rather employees of the Chinese National Petroleum Company.) And it doesn’t seem coincidental that Beijing has made serious efforts to court the continent. More-vocal criticism about such ties from the U.S. may be muted by Washington’s reliance on the likes of Saudi Arabia.
Across the Indian Ocean, energy was playing a role in relations between Russia and India. Vladimir Putin, in New Delhi on a two-day trade visit, today signed a memorandum with Indian counterpart Manmohan Singh that would see Russia build four new nuclear reactors for India, whose economic growth is beginning to rival China’s in its need for fuel. The deal comes at a time when India is about to gain access to U.S. nuclear technology, and when the U.S is also trying to sell more military hardware to India, historically an important client for Soviet and then Russian arms sales. But President Putin’s trip also included a new agreement on Russian aircraft engines and another on joint development of a military transport plane, the Associated Press reports. And India’s incentive to make deals with Moscow is increased by its desire for access to Russia’s oil reserves, as the New York Times points out. Also on Mr. Putin’s agenda is a proposed joint venture for oil exploration in Siberia, the Times adds.
India may now be a major power in its own right, but it’s also just one country among many in Western, Southern and Central Asia where Russia is playing or trying to play a dominant economic and political role tied to its muscle in energy markets. (Iran is part of the same petro-political equation.) And if this is just the latest chapter in Russian regional aspirations that hail back to the Great Game, it also comes at a time when energy is again a big source of global anxiety. “The quest for energy security, in short, is a global scramble of power, money and ideas,” The Wall Street Journal says, adding: “the worry is that the geopolitical and economic equilibrium that long enabled the oil industry to smoothly supply customers is a thing of the past.” The Journal predicts events this year — the rise or decline of turmoil in exporting nations and whether large consumers like the U.S. and China can curb their consumption — will test that view.
—
Cheney Slams Senate Opposition on Iraq
A day after President Bush asked Congress to back his decision to send 21,500 more U.S. troops to Iraq, the Senate Foreign Relations Committee voted 12-9 for a nonbinding resolution that criticizes the new plan and declares: “It is not in the national interest of the United States to deepen its military involvement in Iraq.” More than three-and-a-half years after the U.S.-led invasion, the vote moves the Senate closer to what would be its first official repudiation of Mr. Bush’s leadership of the war, as the Los Angeles Times puts it. Only one Republican, Chuck Hagel, joined the panel’s Democrats to pass the measure. But, as The Wall Street Journal notes, the vote gives Chairman Joseph Biden “a solid foothold from which to begin talks with Republicans who share his concern about sending more U.S. troops to try to quell sectarian violence in Baghdad.” These include Sen. John Warner, ranking Republican on the Armed Services Committee, who introduced an alternative resolution that also challenged the president’s new plan.
The senate resolutions were denounced yesterday by Vice President Cheney, who complained that administration critics and the media “are so eager to write off this effort or declare it a failure” that they’re undermining the war effort, as the Washington Post reports. Congressional opposition “won’t stop us” from deploying more troops, Mr. Cheney said, adding that it will only “validate the terrorists’ strategy.” The notion that Iraq has become a “terrible situation” is just wrong, Mr. Cheney argued, declaring that in fact the administration had achieved “enormous successes” there.
—
Also of Note . . .
Washington Post: After the bloodiest year in Afghanistan since the U.S. invasion, the Bush administration is preparing a series of new military, economic and political initiatives aimed partly at preempting an expected offensive this spring by Taliban insurgents, according to senior U.S. officials.
Financial Times: The U.S. government put more pressure on Europe this week to extend financial sanctions to punish Iran for refusing to halt uranium enrichment, but the U.S. is meeting European resistance. The effort comes amid indications that U.S.-only financial sanctions are having a bigger economic impact than expected.
New York Times: As many as four big states — California, Florida, Illinois and New Jersey — are likely to move up their 2008 presidential primaries to early February, further upending an already unsettled nominating process and forcing candidates of both parties to rethink their campaign strategies, party officials said. The changes, which seem all but certain to be enacted by state legislatures, would appear to benefit well-financed and already familiar candidates.
Variety: The blooming presidential campaigns of Democratic Sens. Hillary Clinton and Barack Obama have set fund-raising swings through Los Angeles, as they tap entertainment industry donors for campaign money. The DreamWorks trio of Steven Spielberg, Jeffrey Katzenberg and David Geffen are holding a $2,300-per-person event for Mr. Obama, while industry mogul Haim Saban plans to host an event for Ms. Clinton.
Boston Globe: An emotional Sen. John F. Kerry today said in an unusual speech on the Senate floor that he will not run in the 2008 presidential race and vowed to use his Senate perch to hasten an end to the war in Iraq.
Dow Jones Newswires: China’s economy expanded faster than forecast in the fourth quarter, bringing full-year growth to 10.7%, its fastest pace since 1995, the government said today. Consumer inflation in China came in at a 2.8% annual pace.
Wall Street Journal: The not-for-profit American Stock Exchange has hired Morgan Stanley to advise it on plans to become a for-profit company in preparation for a potential stock offering or merger with another exchange.
San Jose Mercury News: EBay reported a 24% year-to-year increase in fourth-quarter earnings that exceeded analysts’ expectations, with good performances for the company’s three main business units: marketplaces, PayPal and Skype.
Detroit News: The United Auto Workers is upset over the possibility that Ford Motor may pay bonuses to some managers and top executives, and the issue is threatening to delay progress on competitive operating agreements at some Ford factories, according to sources familiar with the situation.
Women’s Wear Daily: Looking to grow beyond its core customer, Wal- Mart appointed chief marketing officer John Fleming to the new post of chief merchandising officer, making him responsible for almost everything the $210 billion U.S. division sells under a new structure that puts all apparel, home, entertainment and grocery products under his supervision.
BBC: Senior international officials are gathering in Paris for a major donors’ conference to help rebuild Lebanon, with the U.S. and France already pledging $1.4 billion in aid and loans. Lebanon hopes to raise up to $9 billion to help it recover from last summer’s conflict with Israel and a massive public debt.
—
Quote of the Day
“A lot of these earnings are because these companies are able to buy a lot of goods cheaply abroad. . . . If the dollar starts falling, this thing could really blow up,” billionaire financier Carl Icahn tells Bloomberg, in arguing that U.S. stocks and corporate earnings are vulnerable to a continued decline of the dollar.
Joseph Schuman. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 26, 2007. pg
A Brand-New Approach
Close your eyes and imagine Uganda. What comes to mind? Images of Idi Amin and his genocidal murders? Or more recent scenes of “nightcommuting” children swarming rural towns at dusk to avoid impressment into the Lord’s Resistance Army? That is not the picture of Uganda that has greeted viewers of CNN International during the past year. Instead, the channel has aired a steady stream of commercials featuring lush jungle foliage, silver-backed gorillas in the mist, and rugged river gorges-all meant to convey the message that Uganda is, as its new advertising slogan states, “gifted by nature.”
Uganda’s marketing blitz, concocted by the giant publicrelations firm Hill & Knowlton at a cost of nearly $650,000 and promoted through a $1 million ad buy on CNN, is simply the latest example of what has come to be known as “nation branding”using modern marketing techniques to reshape public opinion of a country. Other countries launching controversial brandburnishing efforts in the past year include Nigeria (billing itself as the “Heart of Africa”) and Israel, which, after three years of research and focus groups, started a new marketing push that makes no mention of the conflict with Palestinians, or even religion (“Israel starts with I” is one of the oh-sosnappy slogans).
The brand management of nations, regions, and cities has become such a hot topic that there is even a quarterly British journal devoted to the practice: Place Branding, now in its second year of publication. Last April’s issue tackles such topics as whether Africa could use branding to improve its image, the use of food to help brand places, and an exploration of whether England needs to develop a brand distinct from Britain. Most of the articles feature turgid academic language-replete with buzzwords such as “correspondence analysis” and “tertiary communication”-and are illustrated with nearly incomprehensible flowcharts and diagrams describing “brand personality dimensions” and “image communication.” Clearly aware that the concept of nation branding is often met with a hefty (and well-deserved) dose of skepticism, Place Branding often comes off sounding a little defensive. Several issues have carried at least one article defending the concept, such as an article in the November 2005 issue titled, “Geo-branding, are we talking nonsense?” (Answer: Of course not.) And an editorial in the January 2006 issue that asked the hot-button question, “Is place branding a capitalist tool?” (Answer: Yes, but in a good way.)
Place Branding’s founding editor is Simon Anholt, a British marketing guru and longtime image consultant to governments (he is sometimes wrongly credited with inventing the “Cool Britannia” slogan that his country used to great effect in the late 1990s, though he did work on the campaign). As Anholt defines it, nation branding involves a combination of the promotion of tourism, investment, and trade, plus public and cultural diplomacy. Countries that want to succeed in this era of globalization, according to Anholt, must have a coordinated “brand strategy” in all of these areas.
Which states have the best brands, and which are most in need of help from the likes of Anholt? Place Branding, along with Seattlebased research firm GMI, has helpfully developed the Anholt Nation Brands Index to tell you. The index uses a public-opinion survey to judge a selection of countries on the basis of six criteria-Anholt’s trademark “Nation Brand Hexagon”tourism, exports, governance, investment and immigration, culture and heritage, and people. The latest results, which can be found online at www.nationsbrandindex.com, rank the United Kingdom as the world’s top brand, with Turkey in last place of the 35 countries evaluated. The United States ranks 10th.
It would be easy to dismiss Anholt as a huckster, cloaking an old idea in marketing jargon in order to wring hefty consulting fees out of governments desperate to drum up foreign investment. After all, countries have always tried to market themselves as destinations for business and travelers. They have always tried to promote their products abroad. And they have always tried to shape public perceptions of their foreign policies through propaganda. They just never had hexagons or “brand personalities” to help them do it. Moreover, the image of a country, linked as it may be to stereotypes, often has concrete roots in history. It cannot be as easily manipulated as the public’s perception of a laundry detergent or cereal.
But to Anholt’s credit, he is acutely aware that “rebranding” a country is a difficult business. He is especially disdainful of marketing campaigns that attempt to slap a new slogan on a country that remains fundamentally unchanged. “A lot of very poor countries-Uganda and Nigeria, for instance-are spending millions on TV campaigns. I would be astounded if that made any difference to people’s views of the country at all,” he says. “In fact, I suspect it will make it worse because people know how much advertising costs. It will simply reinforce the idea that these places are corrupt because they are spending so much on what amounts to propaganda while their people are starving.”
The more one talks to Anholt and reads his essays, the more one realizes that his vision of branding isn’t really about marketing at all. It’s about reforming “the product,” i.e., the actual country. That means changing policy. For instance, he cites the “rebranding” of South Africa as an example. “The rebranding miracle was a political miracle. It was the end of apartheid,” he says. “Marketing may have helped communicate that internally to people, but it didn’t create the miracle.” Anholt is aware that the real workreforming legal systems, building new roads, or reducing povertycan take decades.
The problem is, when you start defining branding as policy innovation, what a marketing consultant says about it becomes less and less important. And much of the policy advice in Place Branding is so facile as to be useless. Anholt’s answer to Israel’s negative image? End the conflict with the Palestinians. His idea for improving perceptions of the United States? Ask permission before invading a country. Here he is in the April issue, writing about the need for countries to create new things to boost their brand:
* Old boring things are very boring.
* New boring things are fairly boring.
* Old interesting things are fairly interesting.
* New interesting things are very interesting.
Can you imagine paying for that sort of advice? Unfortunately, too many countries today are wasting precious revenue doing just that.
| [Sidebar] |
| Pitch perfect: Countries are increasingly using modern marketing tools to boost their images abroad. |
| [Author Affiliation] |
| Jeremy Kahn, former managing editor at The New Republic and a former writer at Fortune magazine, is a freelance journalist based in Washington, D.C. |
Jeremy Kahn. Foreign Policy. Washington: Nov/Dec 2006., Iss. 157; pg. 90, 2 pgs
The Globalization Index
It’s a small world, and globalization is making it smaller, even in the face of conflict and chaos. For the sixth year, FOREIGN POLICY, in collaboration with A. T. Kearnej, sorts out globalization’s winners and losers. Find out which countries come out on top and which ones are falling behind.
* POLITICAL ENGAGEMENT
Including participation in treaties, organizations, and peacekeeping
* TECHNOLOGICAL CONNECTIVITY
Including number of internet users, hosts, and secure servers
* PERSONAL CONTACT
Including telephone, travel, and remittances
* ECONOMIC INTEGRATION
Including international trade and foreign direct investment
The Global Top 20
The world’s most integrated countries come in very different shapes and sizes, and they have followed very different paths to globalization.
Recent months have offered plenty of fresh evidence that the world is falling apart. Conflict in the Middle East, a nuclear stalemate between Iran and the West, perilously high oil prices, and the collapse of the Doha round of global trade talks all suggest a world that has gone off the rails. In this volatile environment, isolation has a powerful appeal. Why should states bind themselves more firmly to such an unstable political and economic order? Why would they willingly court greater reliance on foreign producers and politicians? Why, in short, should they want globalization?
Part of the answer is that the daily headlines that report each new crisis or conflict miss the gradual but often profound currents of global integration that lurk beneath the surface. Fractious though the world may be, globalization still has much to offer, and a momentum of its own. The annual A.T. Kearney/FOREIGN POLICY Globalization Index examines the underlying international trends that reveal whether the world’s leading nations are becoming more or less globally connected.
This year’s index looks at data from 2004, which was a banner year for global political integration, at least on paper. In May of that year, the European Union (EU) took on 10 new members. A month later, European leaders drafted a constitution to cement the union’s remarkable expansion. For its part, the NATO alliance added seven brandnew members. And on the other side of the globe, Cambodia and Nepal joined the World Trade Organization. In the corporate world, too, former bitter rivals joined hands. After months of legal wrangling, software powerhouses Oracle and Peoplesoft merged. Some of the steps toward integration, of course, turned out to be false ones. The March 11 bomb blasts in Madrid led to heightened security and tighter immigration policies across Europe. And in 2005, voters in France and the Netherlands unceremoniously sent the EU constitution back to the drafting table.
But by the numbers, 2004 was still a good one for globalization. International trade grew by a robust 9 percent, and trade became more central to most national economies. Trade in merchandise led the way, growing even faster than services. Many countries in the developing world shared in the profits as commodity prices soared, thanks to powerful demand from China. And it wasn’t just steel, fuel, and concrete that headed east. So too did piles of mostly Western cash: Foreign investment in Asia jumped 45 percent from the previous year. Latin America also got a boost from foreign investors, who upped their ante in the region by 44 percent. Overall, foreign direct investment increased 9 percent, and most of that increase was due to investment in developing countries.
Cooperation extended to realms beyond economics. Financial and personnel contributions to U.N. peacekeeping missions jumped, as a spate of new missions got under way or expanded in places including Burundi, the Democratic Republic of the Congo, Haiti, and the Ivory Coast. International tourism also soared to record levels, with the fastest growth in Asia and the Middle East. Many of those not traveling were at least plugging into the world at home. Internet usage spiked in some unlikely places, including Indonesia, Morocco, Nigeria, and Senegal. Of course, the spread of the Internet was not welcome news for phone companies around the world; the growth in telephone contacts slowed considerably.
In an effort to take stock of globalization’s progress, the index examines several indicators spanning trade, business, politics, and information technology to determine the rankings of 62 countries. These countries together account for 96 percent of the world’s gross domestic product (GDP) and 85 percent of the world’s population. The index measures 12 variables, which are divided into four “baskets”: economic integration, personal contact, technological connectivity, and political engagement.
The resulting rankings offer a breakdown of which countries are globalizing and which are not. Even more, the index reveals the very different ways that countries are opening themselves up. For some, globalization is primarily an economic phenomenon. But there are many other ways of assessing how global a country is, from international phone calls and remittances sent abroad to the number of Internet users a country has and its participation in international treaties. France, for example, tops the rankings in political globalization-as measured by such factors as participation in treaties, peacekeeping, and international organizations-but it lags badly on the economic side because of high tariffs and stubborn agriculture subsidies. Clearly, states prefer some forms of globalization to others. But no matter the crisis du jour, the forces of globalization remain a reality for everyone.
THE WINNERS’ CIRCLE .
Perennial powerhouse Singapore kept its place atop the Globalization Index, but there was plenty of jostling in the top 10. In one of the biggest moves, Australia climbed four spots to eighth place. High commodity prices-mining accounts for 5 percent of Australia’s economy-combined with strong services and greater foreign investment to boost the Aussies’ economic ranking. Switzerland padded its score by almost doubling its financial contributions to U.N.sponsored peacekeeping missions and with the help of a citizenry that keeps in close touch with the rest of the world through tourism and remittances. Ireland, the most globalized country in 2001 and 2002, lost two places as foreign investment shifted to Asia and Eastern Europe. The United States climbed one rung, buoyed as always by an off-thecharts technology score. More foreign investment in the United States and a greater financial commitment to international peacekeeping helped outweigh its poor marks for supporting free trade and entering into treaties.
Many countries in the developing world shared in globalization’s profits as commodity prices soared, thanks to powerful demand from China.
The Rankings
In the table, the countries ranking in the top 10 in each category are shaded red, and those ranking in the bottom 10 are shaded blue.
Waiting for the Heavyweights
Ask investment bankers about globalization’s newest frontier, and they might respond with one cryptic syllable: BRIC. The acronym, coined by the investment bank Goldman Sachs, stands for Brazil-Russia-IndiaChina. “If things go right,” says one Goldman report, “in less than 40 years, the BRIC economies together could be larger than the G6 [Britain, France, Germany, Italy, Japan, and the United States] in US dollar terms.” But for all their prominence in predictions about globalization’s future, the BRlCs have generally scored poorly on the Globalization Index, in large part because they have massive populations that are still rural and isolated from the global economy.
This year’s index shows that the isolation may finally be ending. China climbed three spots in the index, while Brazil and Russia each improved by five places. India’s ranking remained the same, but its overall performance improved in most areas. Each of these developing-world heavyweights is opening up in its own way. China’s trade volume grew to more than $1 trillion in 2004, pushing it past Japan to become the world’s third-largest trading nation (behind the United States and Germany). Foreign direct investment in Russia rose on the strength of the oil and gas sector. Investors also warmed up to India and Brazil in 2004-foreign direct investment in those countries increased by 23 and 80 percent, respectively.
Today the BRlCs are best known for the goods they supply to the rest of the world: everything from inexpensive consumer electronics to commodities and information technology services. But what happens when their consumers start connecting with the global marketplace? Experts believe that an economy starts to hit a “sweet spot” in terms of consumer spending when income per capita crosses $3,000 per year. Russia has already reached that level, and China and Brazil may be there in the next decade, with India following close behind. International banks are already lining up to help provide the plastic for the anticipated consumer boom. At that point, globalization will have an important new engine: millions of developing-world consumers armed with credit cards and a hunger to spend.
Dreaming big: Consumers in the developing world’s rural areas may be getting ready to spend.
Rich Man’s World
The extremely wealthy often pose delicate challenges for national governments. For starters, they have resources on par with national treasuries; Bill Gates’s personal fortune is larger than the GDP of Vietnam, after all. And they sometimes have the political ambitions to match. Silvio Berlusconi and the recently deposed Thaksin Shinawatra used their billion-dollar empires to become the leaders of Italy and Thailand, respectively. Many observers saw Vladimir Putin’s assault on Russian billionaire Mikhail Khodorkovsky as a bid to keep the charismatic businessman from moving into politics. Putin may have had reason to feel cornered: The wealth of billionaires accounts for nearly 20 percent of Russia’s GDP.
Some governments work just as hard at attracting the rich as reining them in. Singapore-the most globalized country-revised its tax laws in 2004 to lure in billionaires from India and Hong Kong. Only four billionaires hail from Singapore, but dozens of others now stash their money there.
The United States is still home to the world’s greatest wealth. According to Forbes, the United States boasts nearly half of the world’s billionaires (371 of 793). But the collective net worth of billionaires in less globalized countries-such as Brazil, India, and Turkey-makes up about 10 percent of each country’s GDP. And the figures appear to be rising as the developing world quickly adds new faces to the ranks of the ultrarich. India’s list of billionaires grew from 9 to 19 in the last year, mainland China now claims 8, and Turkey comes in with an impressive 21 billionaires, seven more than France. Political elites in these countries better take notice: The nouveau riche may soon be after their political capital as well.
Sweet ride: The ranks of the world’s super-rich are swelling.
The Toxic Few
There’s a lot of hot air surrounding globalization-literally. With only a few exceptions, highly globalized nations spew more carbon dioxide per capita than less globalized countries. The United States, Australia, Canada, and Singapore-all of which score well in the Globalization Index-also rank among the world’s worst polluters. The greenest countries in the index’s top 10 are Sweden and Switzerland, which rely heavily on hydroelectric power. On the flip side, Iran, Russia, and Saudi Arabia neither score well on the index nor are they environmentally friendly. These major oil producers are not only selling to others, they are consuming a lot of their own product.
Cash on the Side
Taxes may be as certain as death, but they are a lot easier to cheat. Millions of people around the world do just that every year by working in the shadow economy-those realms of business that should be subject to government taxation but aren’t. The economies that are most in the dark are those least connected to the world: There is a strong negative correlation between a country’s score on the index and the estimated size of its informal economy. Panama’s informal economy is the largest in the world as a percentage of gross domestic product, the result of inflexible labor laws and cumbersome bureaucracy. Among the most globalized countries, Sweden and Denmark have large informal sectors-populated by people who are trying to escape some of the world’s heaviest labor taxes.
Latin America’s Soft Left Turn
No region has moved further to the left in recent years than Latin America. A new crop of leaders, including Brazil’s Luiz Inácio “Lula” da Silva, Bolivia’s Evo Morales, and Venezuela’s Hugo Chávez, have often expressed deep skepticism about the fairness of economic globalization. During his presidential campaign, Lula called the proposed Free Trade Area of the Americas an “annexation” of Latin America by the United States. And one of Morales’s first acts as president was to restore national control of Bolivia’s natural gas refineries, declaring, “The pillage of our natural resources by foreign companies is over.”
It’s the kind of talk that sends shivers down free traders’ spines. Yet for all the rhetoric and atmospherics, there’s scant evidence so far that the political shift has actually clipped globalization’s wings. In fact, this year’s index shows most Latin American countries-with the exception of Colombia and Venezuela-climbing the ranks. The region’s economic output grew by a healthy 6 percent. Regional giants Argentina and Brazil both jumped in the index’s economic rankings, and Panama and Peru upped their technology scores as more citizens logged on to the Web.
In part, these results reflect a small regional economic boom as Argentina emerges from its recent financial meltdown. But it is also clear that the Latin American left is not entirely divorced from economic reality. Despite Lula’s leftist trappings, he jetted to the World Economic Forum in Davos, Switzerland, to woo international investors just a few weeks after his inauguration. The trip, and other signs that he was not willing to alter Brazil’s trajectory dramatically, outraged many leftist die-hards. When Lula attended an annual antiglobalization meeting last year, some protestors heckled him by yelling, “Lula, come back to reality!” But the record of his first four years in office suggests he never left.
Buying into Dubai
Companies hoping to make a splash with global investors once had few options. New York and London were the places to list their names and launch their shares. Global markets may be all about competition, but for many years there wasn’t a lot of competition between financial markets. That may finally be changing.
A host of new sites are bidding to lure the world’s CEOs and financial leaders. One of the most aggressive comes from tiny Dubai, a gulf emirate with little oil but plenty of moxie. The United Arab Emirates’ Crown Prince Sheik Mohammed bin Rashid al-Maktoum has spearheaded Dubai’s dash to global prominence. In 2005, the Dubai Exchange opened its doors. oil money in the region has helped fuel the project. The fact that the emirate does not collect taxes or regulate companies as aggressively as some Western exchanges hasn’t hurt, either. Major banks and investment houses are snapping up office space in Dubai’s new financial district.
As befits an aspiring agent of globalization, Dubai attracts thousands of immigrants from the Middle East, Asia, and Europe. About 80 percent of the emirate’s population is expatriate. Manual labor comes from as far away as Bangladesh, Sri Lanka, and the Palestinian territories. The massive building projects where they toil, such as the artificial islands built in the shape of a palm tree, cater to the wealthy pining for luxury and seclusion. Sometime residents now include soccer star David Beckham and crooner Rod Stewart.
The flow of people, money, and expertise is hastened by Dubai’s open-skies policy. Even though the government of Dubai owns Emirates Airline, it has welcomed carriers from dozens of other countries. Airline competition, it seems, is a small price to pay for making sure that all flight paths lead to Dubai.
Safe harbor: Dubai wants to be the next big thing in global finance.
Want to Know More?
The data sources and methodology used to compile the sixth annual A.T. Kearney/FOREIGN POLICY Globalization Index are available online at www.ForeignPolicy.com and the Web site of A.T. Kearney’s Global Business Policy Council, at www.ATKearney.com.
The World is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus and Giroux, 2005) by New York Times columnist Thomas L. Friedman provides an excellent primer on globalization and its consequences. A.T. Kearney’s Paul A. Laudicina advises businesses on how to confront the pressures of globalization in World Out of Balance: Navigating Global Risks to Seize Competitive Advantage (New York: McGraw-Hill, 2005).
FOREIGN POLICY has examined several of globalization’s cultural and corporate icons recently. Ibsen Martínez discusses why Latin soap operas travel so well in “Romancing the Globe” (November/December 2005). In “The Center of the World” (September/October 2005), Brook Larmer chronicles Chinese basketball star Yao Ming’s rise to global stardom. And Robert Litan examines the challenges corporations face doing business in multiple markets in “Attention, Wal-Mart Executives” (November/December 2005).
For links to relevant Web sites, access to the FP Archive, and a comprehensive index of related FOREIGN POLICY articles, go to www.ForeignPolicy.com.
©Copyright 2006, A.T. Kearney, Inc., and the Carnegie Endowment for International Peace. All rights reserved. A.T. Kearney is a registered service mark of A.T. Kearney, Inc. FOREIGN POLICY is a registered trademark owned by the Carnegie Endowment for International Peace.
Foreign Policy. Washington: Nov/Dec 2006., Iss. 157; pg. 74, 8 pgs
HOW GLOBALIZATION WENT BAD
| From terrorism to global warming, the evils of globalization are more dangerous than ever before. What went wrong? The world became dependent on a single superpower. Only by correcting this imbalance can the world become a safer place. | By Steven Weber, Naazneen Barma, Matthew Kroenig, and Ely Ratner |
| [Sidebar] |
| The world is paying a heavy price for the instability created by globalization and unipolarity, and the United States is bearing most of the burden. |
| [Sidebar] |
| If there were rival great powers with different cultural and ideological leanings, globalization’s darkest problem of all-terrorism-would look different. |
| [Sidebar] |
| Want to Know More? |
| For more discussion of the virtues and dangers of unipolarity in a globalized world, read John J. Mearsheimer’s The Tragedy of Great Power Politics (New York: W. W. Norton & Co., 2003), America Unrivaled: The Future of the Balance of Power (Ithaca: Cornell University Press, 2002), edited by G. John Ikenberry, and Niall Ferguson’s “A World Without Power” (FOREIGN POLICY, July/August 2004). |
| Stephen M. Walt looks at how other nations are challenging U.S. dominance in Taming American Power: The Global Response to U.S. Primacy (New York: W.W. Norton & Co., 2005). In “David’s Friend Goliath” (FOREIGN POLICY, January/February 2006), Michael Mandelbaum argues that the world secretly wants American hegemony. Insight into America’s strategic view of the post-Cold War world can be found in Robert Kagan’s Of Paradise and Power: America and Europe in the New World Order (New York: Alfred A. Knopf, 2003). |
| The classic text on balance of power thinking remains an essay by German historian Leopold von Ranke in 1833, “The Great Powers,” available in Leopold Ranke: The Formative Years (Princeton: Princeton University Press, 1950). AJ.P. Taylor’s The Struggle for Mastery in Europe, 1848-1918, offers an authoritative account of how balance of power politics shaped the 20th century, |
| For links to relevant Web sites, access to the PP Archive, and a comprehensive index of related FOREIGN POLICY articles, go to www.ForeignPolicy.com. |
| [Author Affiliation] |
| Steven Weber is professor of political science and director of the Institute of International Studies at the University of California, Berkeley. Naazneen Barma, Matthew Kroenig, and Ely Ratner are Ph.D. candidates at U.C., Berkeley, and research fellows at its New Era Foreign Policy Center. |
Steven Weber, Naazneen Barma, Matthew Kroenig, Ely Ratner. Foreign Policy. Washington: Jan/Feb 2007., Iss. 158; pg. 48, 7 pgs
Sustained Robust Growth Challenges Beijing; Gains Spur Leaders To Address Gap Between Rich, Poor
By delivering another year of double-digit growth, China is managing to sustain a surprisingly fast economic expansion. That success is prompting the country’s leaders to try to better manage the economy’s excesses and ensure that the growth’s benefits are more widely spread through society.
It now looks certain that China’s economy has expanded by 10% or more in real terms for four straight years. The government has issued a preliminary estimate of 10.5% for economic growth in 2006. The National Bureau of Statistics is scheduled to release a more detailed account of the nation’s economic performance for the year tomorrow, but isn’t likely to revise that figure substantially.
If current growth rates continue, China could overtake Germany as the world’s third-largest national economy, with annual output of more than $3 trillion, as early as 2008. China passed the $2 trillion mark in 2005, when it replaced the United Kingdom as the fourth-largest economy.
By comparison, the world’s advanced economies together probably grew about 3% last year.
Many observers see in China the 21st-century counterpart to the emergence of the U.S. and Germany as industrial powers in the early part of the 20th century, and of Japan in the latter half. By shifting millions of people out of agriculture and into manufacturing, and by investing to build the infrastructure of an advanced economy, all of those countries, at different times, managed long periods of sustained, fast growth. China gets the benefit of following a path the others have already laid down.
“China is bursting at the seams. It is growing much faster than any emerging economy has, ever,” said Carl Weinberg, chief economist of High Frequency Economics. “What that tells us is that it’s easier to develop in a developed world. It’s easier to modernize when all the countries around you are already modernized.”
China’s four-year run could even be considered unexceptional for the country: Its economy has grown an average of about 9.8% a year since it began market reforms in 1978. What has changed in more recent times is that the rate of growth has steadied from year to year, making the economy less volatile. That can be attributed in part to better policy making, as well as the increasing size of the private sector, which is less prone to the boom-and-bust investment cycles of the planned economy. In addition, skeptics believe China’s official economic statistics understate actual volatility.
From a longer-term perspective, the past couple of years have seen a cyclical upswing to slightly above-average growth rates for China, helped by a surge in exports and investment. Many analysts expect China to face something of a cyclical downswing over the next couple of years — but in the Chinese context, that would mean annual growth rates that are perhaps closer to 9% than 10%.
The combination of large absolute size and fast growth has made China attractive to businesspeople and investors world-wide. In just a decade, China has nearly tripled its per-capita gross domestic product, a rough measure of the size of the economic pie available to each person. Yet, that figure is still less than $2,000, compared with more than $42,000 in the U.S. and more than $35,000 in Japan. China is far from a rich country, especially because its rural population — which accounts for some three-quarters of the nation — has badly lagged behind the gains in its more prosperous cities.
“Even though China’s economy is already among the largest in the world, China has 1.3 billion people and in terms of per-capita GDP does not even rank in the top 100,” Premier Wen Jiabao said in a speech this month. “Economic and social development is very uneven. So for a fairly long time into the future, development will still be our central task.”
Rural incomes are still growing more slowly than in the country as a whole, and there is evidence some of the poorest are becoming even worse off.
Rather than focusing on growth alone, policy makers are now trying to achieve a more equitable distribution of resources. For instance, the government has canceled school fees for children in rural areas, and has also promised to expand the coverage of basic medical- insurance and social-welfare plans — which now focus primarily on the cities — to more rural residents.
Andrew Batson. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 24, 2007. pg. A.5
Outsourcing Deals Rose in ‘06
The number of contracts companies signed for major outsourcing work rose to a record in 2006, but the cash value of deals fell below $80 billion for the first time since 2002, according to research by consultants Technology Partners International Inc.
Companies signed 208 deals valued at $25 million or more for outsourcing business processes such as handling credit-card transactions, human-resources management, accounting and other office functions. That is up from 166 deals in 2005, according to TPI, a Houston company founded in 1989 to advise clients on outsourcing strategy.
Companies signed 350 deals valued at $50 million or more for tasks such as information processing, up from 341 in 2005. There were 17 deals valued at more than $1 billion, flat with the prior year. The totals included contracts awarded by companies in North America, Europe and Asia, with information gathered from TPI’s work with clients and other industry data.
While the number of contracts rose, the duration and scope of deals declined in 2006, leading to lower total cash value of contracts, says Peter Allen, managing director for market development at TPI. But the decline doesn’t indicate diminished interest in outsourcing, says Mr. Allen, just the opposite.
“What’s more important is that many of these 208 smaller contracts were single process contracts signed for work other than human resources or information technology, but things such as document management, financial services and procurement,” he says.
Successfully outsourcing tasks such as computer operations has taught companies how to negotiate, price and manage outsourcing, he says, and has given managers confidence to look deeper into the business for outsourced savings. “There is a maturing of the outsourcing business model that is behind this uptick,” Mr. Allen says.
Outsourcing has become a fixture in debates about the U.S. trade balance, global competitiveness and even the quality of our schools and colleges. The term appears to have become interchangeable with moving jobs offshore. TPI says about half the work North American companies outsource actually move abroad. Besides the obvious labor savings, companies benefit by shrinking development and production time by working around the clock, around the world.
But moving work to developing countries can also expose a company to language and cultural differences, political instability and stolen intellectual property. Companies such as Accenture Ltd., Electronic Data Systems Corp. and the IBM Global Services unit of International Business Machines Corp. have emerged as outsourcing leaders by building global networks aimed at giving customers a mix of skills, lower labor costs and reliability.
But the big guys aren’t alone in the outsourcing business. TPI data show that the 100 largest outsourcing contracts awarded in 2006 went to 41 companies. A year ago, the 100 largest deals went to only 36 companies.
The data also show that financial-service operations, such as credit-card processing, experienced the largest increase in outsourcing. A total of 48 deals valued at $6 billion were awarded in 2006, up from 33 valued at $4.8 billion in 2005. Companies benefit when “they can redirect investment from the back office to the front office,” into product design, sales and marketing, Mr. Allen says. “That’s basically what we are talking about behind the current wave of business process outsourcing.”
Outsourcing began in the 1990s and has swept far beyond tasks such as payroll.
Kimberly-Clark Corp. recently awarded a contract to ICG Commerce of King of Prussia, Pa., for procuring maintenance and supplies. ICG will provide purchasing for things from marketing services, travel, telecommunications services and equipment down to maintenance of motors and bearings on industrial equipment in Kimberly-Clark factories. “We will be involved in procuring for critical operations but not the inputs that go into finished products,” says Jason Gilroy, vice president of business development for ICG. “It helps focus an organization on those things that separate it from competitors, as opposed to figuring out which is the best bearing supplier.”
ICG specializes in finding suppliers for everything from bearings to mailing services and delivers that value to its client companies, Mr. Gilroy says. Cutting costs is important but not the only goal. “We deal with inflationary pressures all the time,” he says. “If a company wants to do 20% more in marketing, we can help them do that without spending more money. Sometimes, it’s about keeping budgets flat.”
Steven D. Jones. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 24, 2007.
Davos: The World Economic Forum: Doha Revival Talks Are Set, but Accord Is Unlikely
BRUSSELS — Global trade negotiators hope to restart the Doha round of world trade talks at the World Economic Forum in Davos, Switzerland, this week, but a return to the bargaining table will likely be more symbol than substance.
The key players — the U.S. and the European Union — remain unwilling to cut farm subsidies enough to satisfy emerging economies like Brazil and India.
Trade representatives from 30 leading economies, including the EU, the U.S., China, India and Brazil, will hold one-on-one talks in the Swiss resort before meeting as a group Saturday. They hope to tell the World Trade Organization they are prepared to resume “serious” formal negotiations, said EU Trade Commissioner Peter Mandelson.
Started in 2001, the Doha round is meant to help poor countries gain access to the developed world’s markets by cutting subsidies and tariffs in rich markets — especially in agriculture. In return, wealthy nations would win access to key markets for services such as banking and insurance.
Talks collapsed in July after the EU and U.S. turned down requests by emerging economies such as Brazil and India to trim their generous farm handouts. With little change since then, the ministers are “trying to save face, to show they’re working hard for a deal,” says an official familiar with the negotiations.
“We’ve reached the end game,” Mr. Mandelson told businesspeople and lobbyists in Brussels yesterday. “It’s up to the EU and the U.S. to show leadership.”
In both the U.S. and the EU, however, trade negotiators face resistance from powerful farm lobbies.
Mr. Mandelson proposes a 54% cut in agriculture import tariffs. France, Europe’s largest agriculture producer, wants to cut tariffs by just 39% — and isn’t budging. Without France there is no deal: Mr. Mandelson needs support from all 27 EU members in order to reach a global trade deal.
U.S. agriculture subsidies total some $20 billion a year, above the $17 billion ceiling demanded by the Europeans. At a farmers’ conference last week, U.S. Rep. Collin Peterson, a Minnesota Democrat and chairman of the House Agriculture Committee, promised that the next round of subsidies would “look a lot like what we have now.”
John W. Miller. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 24, 2007. pg. A.7
Davos: The World Economic Forum: Gathering Gives Chance to Burnish Images; Coke, BP to Show Off Green Side, While More Russians Are Coming to Meeting
Davos, Switzerland — The World Economic Forum’s annual Davos gathering is billed as an intimate brainstorming session for business and political leaders. These days, it serves another purpose: polishing corporate and national images.
Nearly twice as many big Russian companies are coming to this Swiss ski resort this year as in 2005 or 2006, including for the first time top executives from natural-gas giant OAO Gazprom. Russian energy companies — and Russia as a whole — have suffered in the West, largely because of tough pricing tactics that twice shut off natural- gas and oil pipelines to Western Europe.
Meanwhile, Coca-Cola Co., blamed by critics for child obesity and draining water from poor communities, among other things, plans to showcase its efforts to improve corporate social responsibility and diversify its product portfolio. And BP PLC Chief Executive Officer John Browne, a co-chairman of the event, is expected to play a leading role in discussions on climate change — a primary focus this year — including a panel called “Climate Change: A Call to Action.” The oil company has been harmed by an explosion at a Texas plant, a propane- trading scandal and an oil-pipeline spill in Alaska. A spokesman for BP declined to comment on Lord Browne’s plans.
Veterans of the 35-year-old schmoozefest say the event has become as much about marketing and networking as exchanging ideas. With 2,400 participants and 500 media people attending — including 24 heads of state and 800 corporate chieftains — the intimacy of earlier years is gone.
But there are other benefits. “You get people trapped for three or four days in a Swiss mountain resort when weather is cold and most of the people are middle-aged or elderly and don’t ski. . . . It’s a great platform,” says Martin Sorrell, CEO of marketing firm WPP Group PLC. With global CEOs, political leaders, nongovernment organizations and major media all there, “you have all the stakeholders you want to influence,” he adds.
The five-star Steigenberger Hotel is renting out about 25 temporary offices to companies that want a staff at the forum, up from one or two 10 years ago. “If we had the space, we’d have customers for 100 or more offices. There’s a lot of demand,” says Ernst Wyrtsch, general manager at the hotel.
Russian companies attribute their big turnout this year to their increasing wealth and interest in expanding globally. Gazprom specifically is concerned about plans being floated by the European Commission to block producers of energy from also retailing it, a move that would complicate Gazprom’s plans to sell its natural gas directly to European Union customers.
“We are very sensitive to the process of liberalization in the EU energy market,” says a Gazprom spokesman. “We want to be part of that dialogue.” The spokesman also confirms that Gazprom is negotiating a major public-relations contract with a consortium of PR firms. “We want to change the perception of Gazprom in the Western press, which is a bit negative,” he says.
Oleg Deripaska, a Russian tycoon, was barred from Davos in 2001 after a racketeering suit was filed against him in the U.S. But the suit was dismissed on jurisdictional grounds in 2004, and this year he is back. Mr. Deripaska is waiting for regulatory approval of a merger that would make his company, OAO Rusal, one of the largest aluminum producers in the world.
“We’re one of the world’s biggest aluminum producers — we have to be there,” says Georgy Oganov, spokesman for Mr. Deripaska. “It’s to get our message across and to get the feel of our industrial partners [in mining and metals] and of where business in general is heading.”
In panels and at other events, Coca-Cola plans to highlight projects to improve community water supplies and reduce emissions of global- warming refrigerants; a new policy to ensure workers’ rights, particularly in areas of conflict where it does business; and portfolio diversification to offer healthy drinks along with soda.
Coke’s aim in Davos is to bring its efforts to a wide audience, rather than to try to outflank critics, says Tom Mattia, the company’s senior vice president in charge of world-wide public affairs and communication. “For us, it really is a platform to get our voice heard, far more than it is about trying to respond to something,” he says.
Davos also offers Coke the chance for its chairman and chief executive, E. Neville Isdell, along with its president and chief operating officer, Muhtar Kent, “to be viewed as executive statesmen,” Mr. Mattia says. Mr. Isdell, who has regularly made the annual trek to Davos, is also a co-chairman of this year’s annual meeting.
In a panel on environmental issues, Mr. Isdell will describe a new “water stewardship” strategy to improve water supplies and sanitation in poor communities in Africa and elsewhere, as well as to ensure responsible use of water at its own bottling plants. The company, which also plans to highlight some of its water work at a reception it is hosting, has invested $17 million thus far in 64 projects in 43 countries to tap wells for poor communities, clean contaminated water and other efforts.
At a breakfast meeting and then a reception it is hosting tomorrow evening, Coke also plans to unveil new “eKOfreshment” beverage coolers it has developed as part of an initiative with Greenpeace and Unilever PLC to reduce emissions of global-warming gases. The new coolers have climate-friendlier refrigerants and use as much as 35% less energy by adjusting to surrounding temperature, Coke says.
National governments also have treated Davos as an opportunity to counter unwanted perceptions.
India last year launched a massive campaign aimed at moving the country’s growth story out of China’s shadow. The campaign started with posters in the Zurich airport where most participants arrived. Buses in the ski resort also carried the slogan: “India — Fastest Growing Free Market Democracy.”
In 2003, leaders of Turkey’s AK party, which had just won elections, also put on a big display. They wanted to counter fears in the West about the party’s Islamic roots. The same year, and again in 2004, there was a big turnout of U.S. legislators and cabinet-level officials at a time when the reputation of the U.S. was in decline because of its decision to invade Iraq. This year, the U.S. government will have a handful of high-level representatives, but not as many as in 2004.
“Fundamentally, one has to recognize that when you have top leaders together as we do, it will also be a platform for such things,” says Andre Schneider, chief operating officer of the World Economic Forum.
It is hard to measure the success of a Davos campaign. After 2003, Turkey’s governing party became a darling of investors and made the changes needed to secure membership talks with the EU. How much Davos contributed, as opposed to actions the Turkish government took later, is unclear.
The Confederation of Indian Industry says on its Web site that its campaign in Davos last year was a success, although that is measurable mainly by media coverage. The global popularity of the U.S. hasn’t recovered since the invasion of Iraq, according to annual multinational surveys.
Marc Champion and Betsy McKay. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 24, 2007. pg. A.7
Etiquette
Cultural Dos and Taboos
1. Do not cross your index finger with the middle finger as a gesture of good luck.
2. When dinning in a Vietnamese home bring a gift to show the family respect and appreciation. Do not present the host or friends with a gift wrapped in white paper. The gift itself should not be white. White is associated with death and is considered bad luck.
3. Remove shoes before entering a private home or place of worship.
4. A handshake is an acceptable form of greeting between persons of the same age, but it is customary to bow to those who are older or of high social rank.
5. When dining out with Vietnamese friends or business associates expect the person who initiated the invitation to pay.
6. There is a great respect given to elders. They are always greeted first. Never use direct eye contact when speaking to an elder. Never insult an elder, it will be a poor reflection on you and will damage personal and business relationships.
Useful links for students of culture:
Foreign Language Phrases for Travelers
http://www.travlang.com/languages/
National Anthems
http://www.thenationalanthems.net/
Holidays Around the World
http://www.earthcalendar.net/
International Recipes
http://members.tripod.com/~GabyandAndy/Internation_Recipes.html
http://www.world-recipes.info/
