NASSCOM Engineering Summit 2013: Is the Global Centre of Gravity Shifting to Asia? - Parag Khanna, Geo Strategist

Is the Global Centre of Gravity Shifting to Asia?

NASSCOM

8 October 2013

Dr. Parag KhannaSenior Fellow, New America Foundation

Senior Fellow, Singapore Institute of International AffairsAdjunct Professor, Lee Kuan Yew School of Public Policy, National University of

Singapore

The World of the 1990s

European Union

Japan

India

China

North America

South America

EuropeanUnion

Africa

Asia Middle East

Today’s Global Marketplace

Structural Economic Convergence Accelerates

Where is the Center of the World?

Asian Growth Stacks Up

China India Japan Australia ASEAN0

1000

2000

3000

4000

5000

6000

7000

8000

2011 (USD Billions)

Total = 19 trillion USD

Global Brain Flow: Expats and Repats

Old and New Production Centers

"Historical" market, which is losing dominance (19th and 20th century)

Market growth and new establishment (21th century)

Great growth market (end of the 20th century / beginning of 21th century)

Relocation

Second Phase Relocation

Sources: BrightHub, Scientific American, Lux Research, World

Resources Institute

Leading Sectors and the Spread of Innovation

The “New” New Thing

Country Traditional Industries New Industries

Philippines Agriculture, shipbuilding Electronics, logistics, BPO

Bangladesh Garment manufacturing Pharma, agro processing, ICT

China Industry, agriculture Clean-tech, advance manufacturing, automotive, telecom

India Food processing, industrial machinery, agriculture

BPO/KPO, animation, pharmaceuticals, retail

Singapore Shipping, logistics, refineries Bio-tech, advanced materials remanufacturing, water treatment, alternative energy

USA EU China Japan South Korea Israel India

Scientific Papers Published

2,967,957 3,712,570 719,971 770,252 254,599 108,706 266,230

Patents Filed

490,226 125,774 391,177 344,598 170,101 7,306 34,287

New Products/ Market penetration

IBM

Microsoft

Motorola

Intel

HP

Xerox

Qualcomm

Nokia

Siemens

SAP

Robert Bosch

Ericsson

Philips

Huawei

Lenovo

ZTE

Shenzhen Futaihong Precision

Innocom Technology

Canon

Toshiba

Sony

Panasonic

Honda

Sharp

Samsung

LG

Hyundai

Dongbu

Dexcel Pharma

Teva Pharma

dbMotion

Gamida Cell Ltd

Infosys

TCS

Cipla

Tata Motors

From “Brain Drain” to “Global Brain Flow”

Recovering – and Rising – FDI Outflow

Top 20 Asian MNCs

Rank Company Global 500 Rank Country Revenues ($ millions)

1 Sinopec Group 5 China 375,2142 China National Petroleum 6 China 352,3383 State Grid 7 China 259,1424 Toyota Motor 10 Japan 235,3645 Japan Post Holdings 13 Japan 211,0196 Samsung Electronics 20 South Korea 148,9447 Nippon Telegraph & Telephone 29 Japan 133,0778 Hitachi 38 Japan 122,4199 JX Holdings 41 Japan 119,25810 Nissan Motor 42 Japan 119,16611 Hon Hai Precision Industry 43 Taiwan 117,51412 Industrial & Commercial Bank of China 54 China 109,04013 Honda Motor 64 Japan 100,66314 SK Holdings 65 South Korea 100,39415 Panasonic 66 Japan 99,37316 Petronas 68 Malaysia 97,35517 Nippon Life Insurance 74 Japan 90,78218 China Construction Bank 77 China 89,64819 China Mobile Communications 81 China 87,54420 Indian Oil 83 India 86,016

Huge increases in Chinese Overseas FDI

Asia’s New Iron “Silk Roads”

No. Country YearInvestment (% of GDP)

1 China 2010 47.742%

2 Indonesia 2010 32.574%

3 Japan 2010 19.774%

3 Malaysia 2010 21.416%

4 Korea 2010 29.572%

5 United States 2010 15.836%

Investment/GDP Ratios Higher in Asia

German

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nce USA

Canad

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Mexico

Brazil

Russia

IndiaChina

Vietnam

Malaysi

a

Australi

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Saudi A

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South Afri

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Nigeria

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Rwanda

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2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

GDP Growth Rate (2010) % of GDP spent on infrastructure

Infrastructure Investment Delivers Higher Growth

Infrastructure & Jobs on top of the Global Agenda

ASEAN’s Growth DriversUrbanization Demograhics Connectivity Investment

• 2-3% per annum urbanization rate

• Mega-cities and commercial centers

• Average age: 27

• High female participation in education and workforce

• Over 20 regional airlines

• High-speed rail network

• Infrastructure spending rates rising to approx. 8%

• ASEAN Infrastructure Fund

Japan Looks to ASEAN

Convergence of Policy Priorities

• Capital controls; currency devaluation• Long-term infrastructure investment• Industrial policy/national champions• Net benefit laws• Counter-cyclical fiscal policy (“stimulus”)• Reducing Gini co-efficient/inequality• Enhancing productivity/return on capital

Diplomacy without Unity

Can Asia Stay Stable?

China’s “String of Pearls”

This should have been answered by now

India Needs Better Navigation

Look West

Look East

India: States versus the State

The Future of Globalization (I)? The Maersk Triple-E

The Future of Globalization (II)? The 3D Printer

Competition Redefines Regions

Contact

PARAG [email protected]