100 Years Panama Canal

Panama celebrates that 100 years ago the Panama canal was opened. Despite this memorable anniversary, future success is far from secure. Competition emerges from the expanding Suez Canal and a possible second canal through Nicaragua.

Read the full article on The Economist >>

Dramatic Global Shift Of Economic Power

The global economic balance of power will shift dramatically over the next 50 years. Current world powers will fiercely loose ground to emerging economies. 

According to the latest OECD projections, the United States will cede it's place as the world's largest economy to China as early as 2016. And India will also surpass the current economic # 1 on the long term. 

G7
Put together, China and India will overtake the combined economies of the G7 nations. Traditional economic giants such as Japan and the European Union, will loose ground to emerging nations with younger populations, such as Brazil and Indonesia.

Explore the full OECD report >>

Africa Is Booming: 10 Things To Know

The African continent is booming. It is about to add millions more to it's labour force in this decade, creating perfect conditions for solid sustainable economic growth. However, this requires a change in development strategy acording to The Independent. 

The Independent published a list of 10 things we didn't knew about the African economy. Here are the highlights:

1. Africa is booming
   "Africa has been the second-fastest-growing region in the world over the past 10 years, with average annual growth of 5.1 per cent over the past decade, driven by greater political stability and economic reforms that have unleashed the private sector in many countries."
   
   
2. Africa is poised to have the largest labour force in the world
   "By 2035, Africa's labour force will be bigger than that of any individual country in the world, which offers the continent a chance to reap a demographic dividend, using its young and growing workers to boost economic growth."
   
   
3. African workers are better educated than ever before
   "Today 40 per cent of Africans have some secondary or tertiary education. By 2020, it will be nearly half."
   
   
4. Steady work is still hard to find in Africa
   "Only 28 per cent of Africans have stable, wage-paying jobs. To reap the benefits of its positive demographics and advancements in education, Africa needs to quickly create more jobs."
   
   
5. With a few reforms, massive job growth is within Africa's reach
   "The experience of other emerging economies shows that Africa could accelerate its creation of stable jobs dramatically. When they were at a similar stage of development as Africa today, Thailand, South Korea and Brazil generated jobs at double or triple the rate of Africa's."
   
   
6. Africa can become the world's bread basket
   "Africa has about 60 per cent of the world's unused cropland, providing it with a golden opportunity to simultaneously develop its agricultural sector and reduce unemployment. On current trends, African agriculture is on course to create 8 million wage-paying jobs between now and 2020."
   
   
7. It's often cheaper for Africans to buy goods made in China than those made at home
   "African manufacturing is declining as a share in most economies, and that needs to stop. Africa is on course to generate 8 million new manufacturing jobs by 2020 but could nearly double that tally if it can reverse this trend."
   
   
8. Nigeria's four largest cities still have only six shopping malls
   "Africa's rising number of consumers is already driving growth in retailing, but the sector could grow much faster. The potential of retail still goes largely unrealised: In Ethiopia, Egypt, Ghana and Nigeria, nearly three-quarters of groceries are bought in tiny informal outlets. If barriers to foreign players were removed and action was taken to boost the share of modern retail outlets, this industry could finally hit its stride."
   
   
9. Africa needs more than petrodollars
   "Mining, oil, and gas contribute significantly to Africa's GDP, but these sectors employ less than 1 per cent of the workforce. Africa needs a jobs strategy, not just a growth strategy. Countries need explicit programmes to create jobs, targeted at labour-intensive sectors that enjoy comparative advantage."
   
   
10. The future for Africa looks bright – but there's still a lot of work to be done
    
    More than 300 million Africans will remain in vulnerable jobs in 2020. And even if governments are successful at promoting job creation, the number will keep rising for at least another 20 years because the labour force is expanding so quickly.
    
    Africa's employment challenge is daunting, but it is not unique. Many other emerging markets have transformed their employment landscapes and made sweeping gains in economic growth, and with the right policies in place, Africa has the right ingredients to produce similar success. Africa may prove to be one of the next great global stories.

Source: The Independent

Switzerland Remains Most Competitive Economy

For the fourth consecutive year, Switzerland is the most competitive economy on the globe. This emerged from the annual Global Competitiveness Report 2012-2013.

The report by the World Economic Forum assessed the competitive landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. Singapore maintained it's second position. Finland overtook Sweden as third. The Netherlands completed the almost all European top five.

Explore the full report here >>

The Secret of Singapore: Casino's

Singapore is among the fastest growing economies in the world. It's secret? Casino's.

According to the World Economic Outlook by the IMF, Singapore's economy grew 14.5 % in 2010. Only Qatar (+16.3) and Paraguay (+15.3) had higher growth numbers. Beside Singapore's traditional economic champion-sectors, it's industry and harbour, gambling became the third driving force behind the small state's economic success.

At first, the local population opposed the exploitation of gambling. But after the construction of two new casino's, hundreds of thousands of Asians came to Singapore. Resulting in additional profits of 5.8 billion dollars.

Singapore's success inspired Taiwan to legalise casino's on the small islands of Matsu and Kinmen, after the Chinese government announced that it's citizens will be allowed to travel alone to these destinations, instead of in the current group trips. This way, also Taiwan hopes to benefit from the fast growing, wealthy and gambling minded Chinese middle class. And thus copy the secret of Singapore.

Gloconomy 2012

eAtlas of Global Development

The World Bank has released an interactive version of the popular Atlas of Global Development. It allows users to map over 175 indicators for up to 200 countries.

Key themes include:

• foreign direct investment
• international trade
• food production
• population growth
• climate change

Go to the interactive e-Atlas of Global Development >>

Compact City Policies Compared

Is there a model that combines sustainable urban development and green growth? The recent OECD publication Compact City Policies: A Comparative Assessment attempts to tackle the issue.

The report came up with four key facts:

1. There is a global trend toward urbanisation that has environmental and economic impacts. By 2050, 70% of the world's population, and 86% in OECD countries, will live in urban areas.
   
   
2. The continuing growth of urban populations calls for a policy response that optimises land resources. Land consumption for built-up areas will increase more rapidly than the population in 30 out of 34 OECD countries.
   
   
3. Demographics have changed. For example, the elderly population has doubled over the past 60 years in OECD countries and tripled worldwide. Urban policies will need to be tailored to the specific needs of the population.
   
   
4. The impacts of global warming and increasing energy prices require new responses. The recent economic crisis has exacerbated the problem by reducing governments' abilities to invest in solutions such as new infrastructure.

Additionaly, the report made 5 recommendations in order to overcome the most prominent challenges and guide compact cities into sustainable development and green growth.

Read the 5 recommendations for green growth >>

Extra $175 Billion For Transport in Developing Countries

Over the next decade developing countries will receive over $ 175 billion extra of loans and grants to improve their transportation systems. This was announced by seven multilateral development banks at the Rio +20 summit.

According to Asian Development Bank President Haruhiko Kuroda “Rapid motorization is creating more congestion, air pollution, traffic accidents and greenhouse gas emissions, especially in developing countries.”

But additionally, mr Kuroda stated that  “Developing countries have the opportunity to leapfrog to a greener future of less motorization, shorter commutes, and more energy efficient transport systems.”

Solutions Available
And sustainable transport solutions are already available.  For example low-cost electric vehicles in the Philippines, urban metrorail systems in Viet Nam, bus rapid transit systems in Mongolia and Bangladesh, and inland waterway transport in the People’s Republic of China.

Therefore, the coaltion of development banks announced to scale up the support for transport in developing countries by $175 billion.

Read full article >>

Is South Africa Still The Gateway To Africa?

Last year South Africa was entered the famous BRICS club. This selection of important emerging economies already had Brazil, Russia, India and China as permanent members. But is South Africa's membership actually valid?

South Africa's economy is just a quarter the size of the smallest member India. It's population is little more than one third of the BRICS' least populous country Russia.

Continental Competitors
On it's own continent, Nigeria displays far more economic growth. Moreover, Nigeria's population of 158 million far exceeds that of South Africa (50 million) and so does Egypt (82 million). And finally, an increasing amount of foreign multinationals prefer to situate their sub-Saharan hubs in Ghana or Kenya, leaving South Africa empty handed.

So the question is: Does South Africa belong in the BRICS club?

Read the full article: South Africa, The Gateway to Africa? >>

China and Asian Development Bank Join Forces on Green Innovation

The Asian Development Bank (ADB) and China have agreed to start several innovative projects aimed to spur green growth. The new strategy is based on inclusive growth, environmentally sustainable growth and regional cooperation and integration.

It focuses on 'natural resources and agriculture; energy; transport; and urban development, with lending and technical assistance centered around new technology, green or social development, and enhanced synergies with regional cooperation and integration programs.'

Read full article from Asian Development Bank >>

New World Bank Data Book Helps Countries Value Natural Assets

The latest edition of The World Bank's The Little Green Data Book provides comprehensive data on countries’ natural capital. This includes agricultural land, forests, protected areas, water resources and for the first time oceans.

The book contains data on more than 200 countries. This information could help policymakers, communities and other stakeholders weigh the value of natural resources and their role in development.

Key findings:

• Overfishing: 85 percent of the world’s ocean fisheries are fully exploited, over-exploited or depleted, causing annual global efficiency losses of $50 billion.

• Pollution: excess nitrogen runoff from fertilizers has resulted in large ‘dead zones’ in the ocean, covering some 250,000 km2, an area the size of Great Britain.

• Habitat loss or conversion: an estimated 35 percent of global mangrove area has been lost or converted, approximately 20 percent of the planet’s coral reefs have been destroyed in the last few decades, with more than a further 20 percent being degraded, and 30 percent of sea grass beds have been destroyed.

Read complete Little Green Data Book >>

Source: The World Bank

Economic Geography Scale Models

Exiting column by The Economist on transport costs and the returns to scale

I think Matt Yglesias' intuition in this post—that Asia's relative economic importance is sure to grow, other things equal, given its huge share of global population—is on the mark. In the details, though, he gets a bit wobbly:

Obviously in the world-as-it-exists the low wages in China are an important issue. But if you imagine a long-term trajectory that's bending toward similar wages around the world with similar prevailing technology, then the key thing for Americans to consider is that Asia is the dominant choice for production even under a level playing field. That's because Asia is where the bulk of the people are.

Ask yourself within the western world why the United States ahas an aviation industry and New Zealand doesn't. It's not because we're undercutting their wages. It's because the total market for airplanes in New Zealand is small so it doesn't make sense to locate a factory there. Instead, they trade sheep for airplanes. And by all accounts they have a high standard of living doing so. But they're not exactly winning the future.

Yet it's difficult to see what a remote nation with relatively few citizens could possibly do to become a world leader in heavy industry or cutting edge technology.

Transport Costs
We need to introduce two very important concepts here: transport costs and the returns to scale. If transport costs were infinitely high, then the global distribution of population wouldn't much matter. Production would be widely distributed because it would be too expensive to ship goods from market to market.

From Scranton to Shanghai
New Zealand would have a manufacturing sector, as would every other country (and indeed, every village). On the other hand, if transport costs were effectively zero, then the distribution of population also wouldn't matter. A business could serve the Chinese market as easily from Scranton as from Shanghai. Because transport costs are somewhere in the middle, location does matter, but how much it matters has varied considerably over the course of the past two centuries.

Global Supply Chain
The migration of manufacturing that serves American markets from expensive American places to cheap American places and then to cheap foreign places was made possible by steady declines in transport and communication costs. It's interesting, then, to read that the Asian wealth this shift has created should attract still more manufacturing to Asia. It's not crazy; obviously, proximity still matters across much of the global supply chain. I wouldn't read the economic history of the past century as indicating strongly that all activity will end up in Asia, though.

Return to Scale
The other concept worth mentioning is the return to scale. Most economists will tell you that New Zealand doesn't lack an aircraft industry because it's small or remote. It lacks an aircraft industry because it lacks an aircraft industry. That is, the incredible capital-intensity and economic barriers to entry of the aircraft industry mean that there are increasing returns to scale. It takes a lot of work and investment to get that first jumbo jet off the assembly line. Once the line is up and running, however, margins improve with each new order.

Airbus
An existing manufacturer will therefore enjoy new-plane costs that no would-be competitor can match. It took heavy European subsidies to get Airbus off the ground—a cost Europe considered worth bearing in order to wrest away manufacturing dominance from Boeing. Europe has more people than America, but it took subsidies to get European aircraft manufacture off the ground because scale was the issue.

Why we have cities
Few industries face scale issues that significant, but increasing returns to scale are a fairly common occurence in the modern economy. They are the reason we have cities, for instance; workers become more productive when they crowd together. Where there are increasing returns to scale, we can expect to observe agglomeration—essentially bunching together. Given the greater population and population density of Asia relative to, say, North America, we might expect relatively more specialisation and innovation, giving rise to the development of more clustering industries, leading to the location of a disproportionate share of economic activity in Asia.

Silicon Valley
This is by no means a given, however. By many standards, Silicon Valley is a relatively underpopulated and remote place. It has nonetheless managed to reign as the world's leading centre for technological innovation for half a century.

Source: R.A. , The Economist, Washington

Chinese Carmakers Slowly On The Rise

The Chinese carmaker industry is constantly faced with success as well as failure. Nonetheless, 18.5 million vehicles were sold last year in China, compared with 13.1 million  in America.

Foreign cars are still preferred in China, according to The Economist. And the Chinese government’s dream of dominating the world car market still seems distant. However, due to technological and design joint-ventures and the fast growing domestic demand, the 'battle to make China more mobile has barely begun'.

Read full article: Chinese carmakers, Still in second gear >>

Delhi Fastest Growing City In Emerging Economies

Delhi is the fastest growing city in all of the emerging economies. From 1995 till 2010, the population of the Indian city has grown with 10 million citizens.

For the next 10 years, another 6 million people are expected to follow, according to the Economist. Delhi is followed by Dhaka and Kinshasa.

Currently, about 52 % of the world population lives in cities. This percentage will most likely increase to 58 % by 2025. Nearly all growth in the global urban population takes place in emerging-economies. Predominantly in Asia.

Infrastructure
This trend will put an enormous pressure on city infrastructure, increasing crowds on transport, worsening water scarcity and exacerbating electricity shortages. The Boston Consulting Group reckons that over the next two decades urban areas in emerging economies will account for about two-thirds of worldwide infrastructure spending.

Explore the Economist chart: Emerging-market cities >>

Mexico Ready For Global Challenges

The ongoing globalization offers opportunities as well as risks. No single economy in the world is immune to these challenges. The results of more integration with international markets offers advantages. But also higher exposure to risks.  

The recent report "Latin America copes with volatility, the dark side of globalization" by the World Bank studies the effects of the new intertwined world economy. It highlights the dangers, but also describes countries' capacity to deal with uncertainty.

Mexico
For example, 80 percent of Mexico's exports go to the US. Consequently, a serious delay in US economic growth would severely damage the Mexican economy. However, the country is not vulnerable with regard to the economic situation in Europe or China. Together with it's good capacity to respond to economic shocks, Mexico seems well prepared for the upcoming turbulent years.

Read the full report Mexico: Well Equipped to Cope with Global Risks >>

Asia: The Same Growth With Less Jobs

As a result of new labour-saving technologies, economic growth in Asia brings less benefits to employees nowadays.

The Asian Development Bank reports that the share of gains in productivity going to workers has decreased since the 1990s. This implies that a given level of growth produces fewer jobs than it used to do in the past.

For example, in Pakistan an additional percentage point of growth increased employment by almost 1.1 % during the 1990s. Today however, a similar increase in growth would only raise employment by 0.7 %.

There are signals that this trend may change, as when economies mature the low-productivity service sector tends to expand.

Read full article: Employment and growth in Asia >>

Africa And Asia Will Lead Urban Population Growth

Africa and Asia together will account for 86 per cent of all growth in the world’s urban population over the next four decades. According to the UN, this unprecedented increase is likely to pose new challenges in terms of jobs, housing and infrastructure.


Africa’s urban population will increase from 414 million to over 1.2 billion by 2050. Asia will soar from 1.9 billion to 3.3 billion inhabitants, according to the 2011 Revision of the World Urbanization Prospects report.

Leading Nations
The largest increases in urban population are expected in India, China, Nigeria, the United States and Indonesia. Over the next four decades, India will add another 497 million to its urban population, China – 341 million, Nigeria – 200 million, the US – 103 million, and Indonesia – 92 million.

India & Nigeria
The projected increase in urban populations in India and Nigeria in the next 40 years will be higher than that of the past four decades, a news release on the report pointed out.

Read full story: Africa and Asia to lead urban population growth in next 40 years >>

Growing Oil Production And Demand: Gulf States

Worldwide oil consumption has increased with 14 % over the last decade. The Gulf states are way ahead in terms of consumption. As well as production.

According to The Economist, The Middle East saw consumption grow by 56% in the first decade of the century. This is four times the global growth rate. And nearly double the rate in Asia, as can be derived from the map. Energy use per head is also rising. According to BP, in 1970 in the Middle East it was half what it was in other emerging markets. By 2010 it was three times higher.

Three explanations for this growing taste for oil:

1. Demography. Populations in the Persian Gulf, and in OPEC as a whole, are growing fast. Tiny Qatar’s population trebled between 2000 and 2010. Saudi Arabia’s grew from around 20m to 27.4m, a 37% increase. Demand for power, water and petrol has risen accordingly.
2. Economic structure. It takes energy to produce energy: pumps must be powered and vast quantities of seawater desalinated. Aramco, the Saudi state oil company, sucks up nearly 10% of the country’s energy output. Attempts to diversify the Saudi economy beyond oil, gas and petrochemicals have not gone far.
3. Inefficiency of domestic energy markets. Some 65% of Saudi electricity is generated using black gold, even as successive price shocks and the relative inefficiency of oil generation have seen it all but phased out in rich countries. Oil is used with such profligacy because domestic consumption is massively subsidised. According to the International Energy Agency, global oil subsidies added up to $192 billion in 2010. OPEC countries accounted for $121 billion of the total.

Read full atricle: Keeping it to themselves; Gulf states not only pump oil; they burn it, too >>

Portugal's Ports: Upgrades Essential

Portugal needs to privatise its ports to become more competitive. According to The Economist more liberalisation is essential in order to compete effectively for container ship business.

Despite it's recent improvements in capacity and productivity and it's strategic location along the busy Asia-Europe shipping route, Portugal's ports are still minnow by European standards.

The report suggests that in order to make further gains, especially in the ultra price-sensitive transshipment market, Portugal needs to steer past two obstructions: powerful service providers and unionised workers.

Read full article: Ports in the storm >>

Environmental Outlook to 2050: Act Now or Face Costly Consequences

The OECD Environmental Outlook to 2050: The Consequences of Inaction presents the latest projections of socio-economic trends over the next four decades.

It also explains their implications for four key areas of concern: climate change, biodiversity, water and the health impacts of environmental pollution.

Despite the recent recession, according to the OECD, the global economy is projected to nearly quadruple to 2050. Rising living standards will be accompanied by ever growing demands for energy, food and natural resources. And more pollution.

The costs of inaction could be colossal, both in economic and human terms. Without new policies, the OECD projects that:

• World energy demand in 2050 will be 80% higher, with most of the growth to come from emerging economies and still 85% reliant on fossil fuel-based energy.
• Urban air pollution is set to become the top environmental cause of mortality worldwide by 2050, ahead of dirty water and lack of sanitation.
• On land, global biodiversity is projected to decline by a further 10%, with significant losses in Asia, Europe and Southern Africa.
• Global water demand will increase by some 55%, due to growing demand from manufacturing (+400%), thermal power plants (+140%) and domestic use (+130%).

According to the report, these projections highlight the urgent need for new thinking. Failing that, the erosion of our environmental capital could increase the risk of irreversible changes that could jeopardise two centuries of rising living standards, states the OECD.
 
More information about the Environmental Outlook to 2050 >>