Globalisation and the Globalisation and the “new globalisers” “new globalisers”

The rise of the East - tipping the global The rise of the East - tipping the global scales? scales?

Or “ Are your wages being set in Or “ Are your wages being set in Beijing/Mumbai” ?Beijing/Mumbai” ?

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Outline:Outline:

EU The twenty-first century is witnessing a shift in EU The twenty-first century is witnessing a shift in the East-West global balance of economic and the East-West global balance of economic and political power with the rise of the two “Asian political power with the rise of the two “Asian giants” China and India.giants” China and India.

EQ 1. How has globalisation contributed to this EQ 1. How has globalisation contributed to this rise in power ? rise in power ?

2. What sorts of pressures might impede this rise?2. What sorts of pressures might impede this rise?

3. What threats and possibilities does the rise of 3. What threats and possibilities does the rise of the East hold for Singapore? Can Singapore the East hold for Singapore? Can Singapore respond effectively to these?respond effectively to these?

What will be the overall impact of rise of China and India on the world economy?

• Global effects on • International trade, markets and finance• Global workforce• Integration of economies

Neo liberal view(economists (who support freeing up national and international economies) believe

“If you free up the flow of private capital, goods and services across national borders then this will lead to raised levels of productivity, GDP growth, employment and real income.”

The East/South Asia is rising! Incomes The East/South Asia is rising! Incomes increasing ; absolute poverty reducing; increasing ; absolute poverty reducing; % of middle income earners increasing% of middle income earners increasing

Globalisation

Globalisation and economic interdependence: how has it contributed to “the rise of the East?

China and globalisation– some key areas for external markets

• Manufacturing e.g. cars, white goods (frig, washing machines) and garments (clothing)

• Science and technology

8 “ cutting edge” areas of science and tech:

biotech, IT, new material, advanced manufacturing, advanced energy, marine technologies, lasers and aerospace

EQ1. How is rise of China shown by a manufacturing case study? Track a T-shirt!

• Where does your favourite t-shirt come from?

• Ever stopped to think about how your t-shirt illustrates globalisation in action?

• How does your purchase as a consumer place you in a complex web of inter-relationships that starts thousands of kilometres away?

History in pictures

T-shirts in the 40s and 50s

Who wears t-shirts?

• Traditionally – young affluent consumers in the developed world (including Singapore). The more attractive and ‘new’ the product, the higher the street value

• Increasingly – aspiring new markets (e.g. China) which want a ‘slice’ of the consumer pie

• In future – emerging ‘less conventional’ markets such as the second-hand markets in poorer nations

• Follow the animation!

EQ 1: T-shirts today

• Before globalisation of markets

• Consumer – American

• Traditional supplier - American

• After globalisation of markets

• Consumer – American + global consumers

• Supplier – China + +

• Cheaper supplier - Bangladesh

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EQ1:What are the factors that caused this ‘globalising’ shift?

• Cost in original country (e.g. USA) rising due to higher standard of living and labour costs

• Designers/manufacturers seek new sources (lower costs esp. labour)

• Manufacturers invest in infrastructure (e.g. sewing machines, packing machines, distribution chains etc.)

• Supply of goods ‘outsourced’ to increase profit margins

EQ 2 Potential pressures? What happens to global wages?

• China US$117.00 – 147.00per month

• Vietnam US$ 94.00 per month

• Bangladesh US$ 64.00 per month

EQ1: This is great! China’s economy develops and cheaper goods for me…

• Benefits – the consumer gets a quality product for a lower price– Manufacturer gets better profit margins– Supplying country (e.g China) gets higher levels

of employment, better paid workforce, better infrastructure…hooray!

– Wealth is shared globally and poorer nations make progress in standard of living, education etc.

– Wider choice of goods and no loss of quality

How does a globalised product get to the consumer? –a trans-national Tshirt

Who benefits? How?(EQ1)• US design• China manufacturer• HK owned company• Raw materials from…• Sold to consumers in…• Shipped under flags of

convenience• Ship’s crew from…• Payroll/financial support in…• Consumer issues handled

by…• Profits in tax-haven

But…• Problems/issues/pressures (EQ2)

– Labour costs in new economies rise– New sources for cheaper labour sought– Emerging economies make short term gains

but can ‘outprice’ themselves– Increased production creates wasteful

consumerism (a ‘throw-away’ attitude) – Increased pressure on environment,

resources etc.

Sidebar! Impact of globalisation on workers’ rights

• Over 300 strikes repressed by employers or the police, in nearly 90 countries

• About 8,500 arrested or detained• 209 trade unionists killed or disappeared• Over 100,000 harassed• 20, 000 dismissed because of their trade union activities• 20 million bonded labourers worldwide• 700,00 women and children victims of cross-border

human trafficking each year• Worldwide, women are paid anything between 10-50%

less than men for doing similar jobs or different jobs of equal value

EQ 1 China In summary:

• China has reaped tremendous benefits from astronomic growth in economy

• China’s population continues to develop in terms of skills and education

• Prosperity has brought higher expectations and a shift from ‘producer’ nation to ‘consumer’ nation

• This brings significant ‘soft power’

What about India?What about India?EQ1: Context of globalisation in IndiaEQ1: Context of globalisation in India

Slide show Slide show http://www.slideshare.net/captaink99/india-http://www.slideshare.net/captaink99/india-globalisation?from=share_email_logout3globalisation?from=share_email_logout3

-- Massive changes since 1990’s : opening to the -- Massive changes since 1990’s : opening to the world, transformed business landscape, IT world, transformed business landscape, IT powerhouse, emerging world-class firmspowerhouse, emerging world-class firms

-- But lopsided growth: benefits urban middle -- But lopsided growth: benefits urban middle classes but not the vast majority of the poor – classes but not the vast majority of the poor – unlike Chinaunlike China

EQ1: Why is India rising (and EQ1: Why is India rising (and maymay be be more stable in long term than China)?more stable in long term than China)?

• Potential drawbacks: Potential drawbacks: the most difficult country to the most difficult country to govern: vast, hugely diverse, split so many govern: vast, hugely diverse, split so many different waysdifferent ways

• Messy democratic politics: Messy democratic politics: multi-party coalitions multi-party coalitions at the centre; kaleidoscope of musical-chair at the centre; kaleidoscope of musical-chair politics in the statespolitics in the states

• But advantages (compared with China): But advantages (compared with China): unity unity and stability; checks and balances; British-and stability; checks and balances; British-endowed liberal institutions; the English language; endowed liberal institutions; the English language; political and civic freedomspolitical and civic freedoms

The role of the IT sectorThe role of the IT sector

• http://www.youtube.com/watch?http://www.youtube.com/watch?v=LnhTQFHkgmwv=LnhTQFHkgmw

• India outsourcing (3 mins)India outsourcing (3 mins)

An example: NEW DELHI, India, and SAN JOSE, An example: NEW DELHI, India, and SAN JOSE, Calif., December 6, 2006 (press release)Calif., December 6, 2006 (press release)

- - Cisco® today announced the next stage of its globalization Cisco® today announced the next stage of its globalization strategy with the strategy with the selection of India as the site for its selection of India as the site for its globalization centerglobalization center, called "Cisco Globalization Center East." , called "Cisco Globalization Center East."

"Cisco chose India as the location from which to expand its "Cisco chose India as the location from which to expand its globalization vision because India has a globalization vision because India has a highly skilled highly skilled workforce, supportive government, innovative customers workforce, supportive government, innovative customers and world-class partners that already have global and world-class partners that already have global capabilitiescapabilities," said John Chambers. ," said John Chambers.

"As our global development strategy. Under Wim's leadership, "As our global development strategy. Under Wim's leadership, Cisco will lead the market transition being driven out of India Cisco will lead the market transition being driven out of India with our talented employees and partners across the globe to with our talented employees and partners across the globe to meet the needs of customers on every continent in the world."meet the needs of customers on every continent in the world."

As a multi-national corporation that today operates in over 120 As a multi-national corporation that today operates in over 120 countries, Cisco's globalization strategy represents an evolution countries, Cisco's globalization strategy represents an evolution in traditional business models by delivering an enhanced in traditional business models by delivering an enhanced customer and partner experience on a customer and partner experience on a 24-hour basis.24-hour basis.

EQ1: India: Other areas of EQ1: India: Other areas of globalisationglobalisation

• International financeInternational finance

• India, despite issues of corruption and India, despite issues of corruption and transparency, has adjusted its regulations transparency, has adjusted its regulations for financial markets to encourage for financial markets to encourage international capital and finance managers international capital and finance managers and investors to operate from India. and investors to operate from India.

Pharmaceutical industry (medicines)Pharmaceutical industry (medicines)• India’s share of world market in pharmaceutical India’s share of world market in pharmaceutical

manufacturing rapidly increasingmanufacturing rapidly increasing• As a production location, the country is benefiting As a production location, the country is benefiting

from its lower wage costfrom its lower wage cost• Other advantages over western competitors Other advantages over western competitors

when it comes to producing medicines e.g. when it comes to producing medicines e.g. transportation costs.transportation costs.

• BUT: sector’s development slowed by major BUT: sector’s development slowed by major infrastructure problems - qualitative and infrastructure problems - qualitative and quantitative shortcomings in energy and transport quantitative shortcomings in energy and transport sectors.sectors.

Other potential growth areasOther potential growth areas• Low cost small vehicle manufacturing (for Low cost small vehicle manufacturing (for

domestic market) domestic market) Tata unveils the $2,500 car Tata unveils the $2,500 car (but what are the global environmental (but what are the global environmental

and energy demand implications ?)and energy demand implications ?)

• Internal consumer demand-Internal consumer demand-

(especially for IT- cellphones)(especially for IT- cellphones)

• Food processing and packagingFood processing and packaging• Medical /cosmetic tourism Medical /cosmetic tourism

India and China “Contest of the Century” ?India and China “Contest of the Century” ?

Potential threats to Rise of the East:Potential threats to Rise of the East:• Rivalry over status as global forces –”Asian giants”Rivalry over status as global forces –”Asian giants”• Competition between China and India – especially Competition between China and India – especially

for raw materials and energy sourcesfor raw materials and energy sources• Demographic stresses (population aging faster in Demographic stresses (population aging faster in

China than in India)China than in India)• Multinationals outsourcing to lower wage Multinationals outsourcing to lower wage

developing countries developing countries • Internal unrest (religious/economic tensions/ strains Internal unrest (religious/economic tensions/ strains

of rapid growth) of rapid growth) • Corruption- political, legal and financialCorruption- political, legal and financial• Environmental degradationEnvironmental degradation

Globalisation

EQ3 What might this rise mean for Singapore?

Concluding ReflectionsConcluding Reflections• If emerging economies enjoy only short If emerging economies enjoy only short

term growth before an industry ‘relocates’ term growth before an industry ‘relocates’ – what then?– what then?

• If developed economies cannot afford to If developed economies cannot afford to compete with countries with lower costs, compete with countries with lower costs, what happens to employment in these what happens to employment in these countries?countries?

• Globalisation is certainly reducing poverty Globalisation is certainly reducing poverty in many developing countries BUT what is in many developing countries BUT what is the impact for developed, more the impact for developed, more established nations?established nations?