Globalization and Role of Emerging Markets

A Classroom Presentation By Muhammad Diljan

Mr. Dawood graduated from CECOS University Peshawar works in UAE for a German Company financed by China Bank and five American Investor, Audited by Indian CA firm working under an MOU with CPA(USA). He has was colleagues.except This paragraph four nothing One belongs to Ghana and the others belong to Moscow, Madagascar and a binary data of the picture of Baghdad. Their boss is from Ukraine having a doctorate from GLOBALIZATION. University of Sydney. They all speak English and contact with their families through skype phone. And the most interesting, he has married to a Russian Lady and his company is following US GAAP. Mr. Dawood is a practical Muslim of strong values but his partner is still going to a catholic church, but both are happy in life believe in freedom, democracy and human rights.

WHAT IS GLOBALIZATION? Thus Globalization is the process of integration of people, companies and governments of different nations across the Globe through economic, political and social activities, aided by high speed means of transportation and communication.

ECONOMIC GLOBALIZATION AND EMERGING MARKETS

Current wave of economic globalization is driven by policies that have created business and investment opportunities for international investors in developing countries due to which these countries which were ,before 1980, referred to as developing countries started being called Emerging Markets after 1980.

Thus you can say that Financial Globalization is the mother of EM.
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

The role of EM in Modern Globalization can be assessed on three different platforms namely; Economic Globalization Political Globalization Social & Cultural Globalization But as a students of Business Administration our discussion will revolve around Economic Globalization.
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

Among emerging markets Brazil, Russia, India and China are the most evaluated and embarked upon by economists, social scientists, students and researchers whenever they intended to explore the global players of the new world order game among the developing countries. These countries are collectively called BRICs and were identified in 2001 at that time it was stated that over the next 50 years these four countries could become a much larger force in the world economy . Such like statements at that time received attention because it was forecasted that the growth in the BRIC countries would beat the growth of the G7 advanced economies.
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

After the end of cold war while the United States appeared to be the winner from the fall of communism, the new economic order that was emerging in the 1990s had profound political, social and cultural implications. The new players were emerging and a new generation of leaders appeared in each of the four countries. Many governments in emerging markets adopted freemarket economic systems, vastly increasing their own productive potential and creating many new opportunities for international trade and investment.

ROLE OF EMERGING MARKETS IN GLOBALIZATION

BRICs countries were not and members of the G-7 but they were going to gain influence and international presence. The increasing production capacity of BRICs was always thirsty of external finances. Which motivated developed nations to globalize their financial and investment activity to these countries. The interplay between the BRIC economies and the G7 is viewed by the investment community as a critical aspect of globalization and interdependence.
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

The BRICs have slowly gained greater influence over the international decision making process, which has been dominated by the major industrial countriesthe G7- since the end of the Second World War. There have been important points of convergence on broad issues since the start of the 21 st century. These issues includes a new global trade regime, a new financial architecture and an expanded role of the BRIC countries in the workings of the multilateral financial institutions such as the International Monetary Fund (IMF) and the World Bank .
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

While Chinas growth depends on the export of manufactured goods to the US and Europe, Brazil focuses on agricultural exports. Russia sells oil, natural gas and other natural resources abroad, while Indias growth has been based largely on its domestic market. The BRICs are geopolitically and economically unique. There is an appealing symmetry in the fact that Russia and Brazil have an abundance of the raw materials that China and India need to grow and improve their infrastructure. It is interesting to see that China has taken over as Brazils main trading partner. In 2010, China also became Russians main trading partner.
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ROLE OF EMERGING MARKETS IN GLOBALIZATION

Up to the most recent financial crisis in 2008, the BRICs have certainly lived up to their promise. Their rapid growth rate of economic development, huge developmental potential has attracted a large amount of foreign direct investment (FDI). In 2010, Direct Investment (FDI) of the BRICs accounted for two third of the total amount of FDI in G7 countries. China is by far the leading emerging market destination of FDI, the country received $106 Billion FDI inflows in 2010, followed by Brazil, which received $48.4 billion. India is on number three in 2009 while Russia still lags behind Indias 2009 statistics.

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ROLE OF EMERGING MARKETS IN GLOBALIZATION

Inward FDI to the BRICs have been distributed to different industries. In China and Russia it has mainly centered on the secondary industry, while in Brazil and India the focus has been on the tertiary industry. The Service industry has been the preferred for inward FDI in Brazil due to its special openness policy. It is legal for foreign investors to hold stock shares in manufacturing industry as well as invest in resource utilization and infrastructure construction. The financial sector, transport and telecommunications in particular, have attracted huge amount of inward FDI. In Russia, fuel industry and metalwork industry has been the main recipient, while in India software, the financial sector and consulting sector have had incredible development over the years due to inward FDI. In China, there have been great investments in the manufacturing industry, but the service sector has also developed significantly.
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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

China's investment climate has changed dramatically with more than two decades of reform. In the early 1980s, China restricted foreign investments to export-oriented operations and required foreign investors to form joint-venture partnerships with Chinese firms.

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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

Since the early 1990s, the government has allowed foreign investors to manufacture and sell a wide range of goods on the domestic market, provided some assurances against nationalization, allowed foreign partners to become chairs of joint venture boards, and authorized the establishment of wholly foreign-owned enterprises. China also authorized some foreign banks to open branches in Shanghai and allowed foreign investors to purchase special "B" shares of stock in selected companies.
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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

Today foreign-invested enterprises produce about 5860% of China's exports (the majority of China's foreign investment come from Hong Kong, Macau and Taiwan), and China continues to attract large investment inflows. From 1993 up till now , FDI in China is increasing and in 2010 it was the world's second-largest recipient of foreign direct investment after the United States.

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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

In 1991 Chinese government initiated a strategy named GO Out Policy to promote Chinese investments abroad. Since the launching of the Going out Strategy, interest in overseas investments by Chinese companies has increased significantly especially among State Owned Enterprises. From 1993 to 2010, Chinese companies have been involved as either an acquirer or acquired company in 25,284 mergers and acquisitions with a total known value of US$969 billion. The number and value of deals hit a new record in 2010. The number of deals that happened in 2010 has been 3,640 which is an increase of 17% compared to 2009. The value of deals in 2010 was US$196 billion which is an increase of 25% compared to the year before.
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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

We see that as the economic globalization is progressing the connection between chinas economy and global economy is becoming tighter. Today it is believed that global economic development can not go with out China. A doctor from the Hanoi University of Vietnam told People's Daily that China's economic development injecting new energy into the regional and global economy and China's steady economic development gives the world's confidence on the early recovery of the global economy after the drop down of international financial crisis.
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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

According to Dr.Martyn Davies (a former Ex:Director of the Confucius Institute), China is not currently obsessed of developing hard power such as military force but keeps showing its soft power using its economic and cultural muscle to build up the international relations. Chinas sharp and two-digit economic growth is considered an economic miracle in the world fostering and creating many commercial opportunities which are attracting overseas investors to invest and start businesses in china. Meanwhile, products Made in China are also going global and accepted by the world. Low price and high quality are now a general impression of Chinese products in the global market.
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ROLE OF CHINA IN ECONOMIC GLOBALIZATION

Kamer Kasim, vice director of Turkeys International Strategic Research Organization told Peoples Daily that Chinas economic development is very remarkable and has both economic and political significance for the world. China, as the 2nd largest economy of the world, not only produces huge amounts of industrial products, but also promotes the development of the whole industrial chain covering from the raw material to the product research and development. According to him China is driving the global economy as engine. Further he mentions that in todays International System of Mutual-Dependence China needs oversea markets as well as raw materials, and other countries also need Chinas cheap but good products, which reduce the possibility of a world war breaking out. This phenomenon, which is especially outstanding in the China-U.S. relations, promotes the global peace, stability and development. 23

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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

Russia is increasingly becoming considered a country with a stable investment climate. Russia has witnessed a large increase in foreign direct investment inflows over the last few years, due to a growing domestic market, rich human capital, natural resources and political stability. Constraints on foreign business are being abolished and the regulatory environment has improved. However, several sectors remain closed to foreign investment. Current regulations restrict foreign involvement in the banking sector, and the government has restricted foreign access to 39 strategic sectors of the Russian economy, including nuclear energy, natural monopolies, military and special machinery, the space industry, and subsoil development.
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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

Russian investment policy includes tax reliefs, reduced administrative barriers, and developing private-public partnerships. The government is planning to invest in infrastructure projects to promote foreign investment. Among improvements for investors, Russia now has the lowest corporate tax rate of any G7 or BRIC country. The government is planning to shorten the time period for foreign enterprises to receive permission on investment projects. The recently formed Department of State Control of Economics is in-charge of removing barriers for foreign investors.

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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

From 1993 to 2010, Russian companies have been involved as either an acquirer or acquired company in 13,834 mergers and acquisitions with a total known value of $613 billion. The number of deals that happened in 2010 have been 3,662, which is a new record. Compared to 2009 this was an increase of 12%. The value of deals in 2010 was US$100 billion, which was the second highest number ever; compared to 2009 this was an increase of 143%.

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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

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ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

Russia were very resistive to the financial globalization up till 1991 but after that it started economic reforms towards gradual privatization which made it adoptable to global financial activities. Up til 2005, Russia was seen as a major buyer of western and US made consumer goods but after 2005 its trade with China increased and it become a major consumer market for China products (24% of China exports). Russia ranks second in the world in export of armaments and has always retained solid positions on the global arms market. Russia contribute a huge number of educated and skillful human resources to the global economy as most active labor force in Russia prefers to migrate abroad. There are now about two million migrants from the former Soviet Union in Germany, and 30 about a million in the U.S.

ROLE OF RUSSIA IN ECONOMIC GLOBALIZATION

In Russia education standard is high as compared to international standard. At the Russian universities, the number of applicants for the departments of physics, biology, mechanics and mathematics is very high as compared to other countries. These professions are in great demand in all over the developed world and Russians in these fields are welcomed and hired at preference in scientific labs of multinational companies. In U.S. laboratories Russian Scientists and engineers are seen more than the average of other countries. Russia is also a greatest supplier of energy (oil, gas, coal, aluminum and chemicals) to the global economy.

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ROLE OF BRAZIL IN ECONOMIC GLOBALIZATION

Brazils economy is the largest in Latin America with a GDP of USD 2.1 trillion in 2010 . Years of economic growth, credible macroeconomic policies and a rising middle class have positioned the country as a leading recipient of foreign investment and an emerging player in global commerce. These factors make the economy one of the worlds most dynamic and promising forces among emerging markets. Brazil is said to be the third-most-attractive country for future FDI, behind China and India. Brazil has one of the most liberal investment climates for outside investors. Foreign investors, both individuals and legal entities, can invest in most of the financial and capital market instruments available to resident investors, without any restrictions. However, Foreign investors are required to hire local entities to act as custodian and representative for regulatory and tax related issues. Investors are also required to complete other formalities like registering with the Brazilian Central Bank, the stock market regulator CVM and the Federal Revenue Service.

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ROLE OF BRAZIL IN ECONOMIC GLOBALIZATION

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ROLE OF BRAZIL IN ECONOMIC GLOBALIZATION

Between 1993 and 2010, 7.012 mergers & acquisitions with a total known value of $707 billion USD with the involvement of Brazilian firms have been announced. The year 2010 was a new record in terms of value with $115 bn. of transactions. The largest transaction with involvement of Brazilian companies has been: Cia Vale do Rio Doce acquired Inco in a tender offer valued at $18.9 billions. More over, Brazil is emerging as a global economic powerhouse, with a growing middle class and a booming trade relationship with China fueled by the Asian giants need for commodities such as soybeans and oil, According to a prediction, Brazil will surpass Britain this year as the sixth largest economy in the world, with a GDP of $2.44 trillion against Britains $2.41 trillion. By 2020, Brazil will be the fifth largest economy in the world. The country is now the leading world exporter of iron, coffee, soybeans, orange juice, sugar and beef. Brazil is also home to one of the worlds largest oil reserves.
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ROLE OF BRAZIL IN ECONOMIC GLOBALIZATION

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ROLE OF INDIA IN ECONOMIC GLOBALIZATION

Since liberalization, the value of India's international trade has increased sharply, with the contribution of total trade in goods and services to the GDP rising from 16% in 199091 to 47% in 200810. India accounts for 1.44% of exports and 2.12% of imports for merchandise trade and 3.34% of exports and 3.31% of imports for commercial services trade worldwide. India's major trading partners are the European Union, China, the United States of America and the United Arab Emirates. In order to encourage FDI in India, the process of regulation and approval has been substantially liberalized. They have introduced a special procedure for FDI called FDI Automatic Route. Under automatic route does not require any prior approval either by the government or Reserve Bank of India (RBI).

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ROLE OF INDIA IN ECONOMIC GLOBALIZATION

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ROLE OF INDIA IN ECONOMIC GLOBALIZATION

India offers low-cost but educated and English speaking youth consisted human resources to the global economy for IT and Business processes outsourcing. India and China are amongst the most pro-competition countries. India produces bountiful of software engineers and software analysts, while China supplies all kinds of equipments. So, as per the current scenario, the conclusion has been derived, "India as back office supplier, China as front office supplier. As many educational institutions of developed countries have globalized their services, India also has also started to follow their footsteps. India is also involved in mergers and acquisitions, throughout its history from 1991 but showed huge increases from 2005 onward. India is beating Brazil but lagging behind Russia in the 40 race of Mergers and Acquisitions.

ROLE OF INDIA IN ECONOMIC GLOBALIZATION

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