global collaborating creates prosperity

Global Connectedness

Sources: DHL Global Connectedness Index, 2011

Concept based on WORLD 3.0 Global prosperity and how to achieve it,

Harvard Business Review Press, Copyright, 20111

NAFTA

LAFTA

EU

ASEAN

World is flat.The world is one huge market.

Anything or anyone can go anywhere, anytime.

Do you think this is true? Are there barriers to connectedness?

2

Global Connectedness – Goods & Service Trade

In comparison to total economic activity (GDP), what percent is global?

When asked about global interaction, the traditional data to compare a country’s external merchandise/service trade with it’s total GDP.

So, lets start there.

Global Trade

3

Total GDP

Global Connectedness – Merchandise & Service Trade

With both merchandise and service international trade at only 30% of the world GDP, there is still a great deal of growth potential. This 30% could actually be closer to 20% if you consider re-exporting of semi-finished products exported to another country for final processing and supplied to the end user. We could be connected a great deal more.

1930

9% of GDP

2011

30% of GDP

Growth in trade

connectedness

Source: DHL Global Connectedness Index, 2012

4

Japan’s Global Connectedness – Merchandise & Service Trade

Japan’s external trade ratio is well below the average. It is mainly due to it large domestic market. It has much room for expansion.

Outward

15%of GDP

Inward

16%of GDP


From worldwide suppliers

To worldwidemarkets

5

USA’s Global Connectedness – Merchandise & Service Trade

The United States’ external trade ratio is below the average. It is mainly due to it large domestic market too. It can expand much more.

Outward

8% of GDP

Inward

13% of GDP


USA


To worldwidemarkets

6

China’s Global Connectedness – Merchandise & Service Trade

The China’s external trade ratio is closer to the average. This might be one of the main reasons China has such high growth. It is helped by valuable imports and it is financed by exports. In the future, serving the domestic market will become more important as wealth is created.

Outward

21%of GDP

Inward

15% of GDP


China


To worldwidemarkets

7

Global Connectedness – Foreign Direct Investment (FDI)


FDI peeked in

2000

20%of capital formation

Foreign direct investment (FDI) to capital formation (Total investment in fixed assets)

FDI settled in

2010


FDI fell in

2007


There is great global economic benefits of FDI (financial transfer, technical transfer, business knowhow transfer, etc.)

8

Global Connectedness – Financial Movement

Source: “Home Bias in International Equity Portfolios: A Review (August 2007)

Foreign equity investment (share purchase only)

Foreign equity investment2005 ~ 2007

20%of all investments

There is much room for foreigners investing in foreign companies. It trust and better communication continues to grow so should investment.

9

Global Connectedness – Communication & Information

20%of all internet connections are international.

5%of all phone calls are international.


We could communicate and share information much more than we are now. This would build trust, investment and greater prosperity.

10

53/140Bits per second per

internet user

International calls

International email

63/140Outward per minutes/capita

112/140Inward per minutes/capita

Source: DHL Global Connectedness Index, 2012(World ranking among 140 countries (99% of world GDP and 95% of population)

Japan’s Global Ranking – Telephone/Internet Communication

Of 140countries

Outward calls

Inward calls

11

Outward email data

Inward email data

Global Connectedness – Visiting foreign countries

1.9%Of Japanese population is from another

country.

Source: UN report Trends in International Migrant Stock: The 2015 Revision.

14.3%Of USA

population is from another

country.

Connecting face-to-face

What percent of the world population are from foreign countries? 3% of the world population live outside of their home country.

What percent of the world population have studied in a foreign country? 2% of university student have studied outside their country.

What professionals are foreigners in the US?33% of USA engineers are from foreign countries.27% of USA mathematician, statisticians and computer sciencespecialists are from foreign countries.24% of USA scientists and researches are from foreign countries. 12

United Arab Emirates 7,826,981 83.7

Singapore 2,323,252 42.9

Switzerland 2,438,702 28.9

Israel 2,046,873 26.5

New Zealand 1,132,736 25.1

Germany 12,005,690 14.9

United States 46,627,102 14.3

Sweden 1,639,771 14.3

United Kingdom 8,543,120 11.3

France 7,784,418 11.1

Greece 1,242,514 11.1

Italy 5,788,875 8.0

Russia 11,643,276 7.7

Turkey 4,580,678 5.81

Japan 2,437,169 1.9

India 5,338,486 0.4

Egypt 297,448 0.4

China 848,511 0.1

Indonesia 295,433 0.1

Vietnam 68,290 0.1

Global Connectedness – Visiting foreign countries

Connecting face-to-face

THE BENEFIT: advanced cultural diversity, learning, teaching, blending, interaction and understanding

13

World 0.0

Business interaction & trade in one city

Source: Concept based on WORLD 3.0 Global prosperity and how to

achieve it, Harvard Business Review Press, Copyright, 2011

Imagine a city or village completely independent from the outside world. It grows

its own food, makes its own clothes, handles all medical problems, etc.

That was the world thousands of years ago.

14

Business interaction and trade from village to area to whole state

The village starts to connect with other villages, trade with each other and help each other when need be. They make agreements on how to work together. Then, that connection and trade continues to grow.

15

Business interaction & trade within a state to the whole nation

The villages in the state continue to expand their connections. Eventually, connections expand into a nation.

More opportunities, better life, more

products/services available

16

National business interaction & trade

World 1.0

We now enter the world of “World 1.0” in which a country tries to trade as much as possible within its boundries, but tries to restrict outside influence. It tries to protect the connections it has established.

17

USA

Regional business interaction & trade

As time passes, a country learns that it is influenced by its neighbors. Therefore, more connection, interaction and trade expands again.

Additional opportunities, products and

services available

18

World 0.0


Source: Concept based on WORLD 3.0 Global prosperity and how

to achieve it, Harvard Business Review Press, Copyright, 2011

That was the total world thousands of years ago.

Imagine a city or village completely independent from the outside world. It grows its own food, makes its own clothes, handles all medical problems, etc.

山形

19

World 1.0


The village starts to connect with other villages, trade with each other and help each other when need be. They make agreements on how to work together. Then, that connection and trade continues to grow.

20

National business interaction & trade

World 1.0

We now enter the world of “World 1.0” in which a country tries to trade as much as possible within its boundries, but tries to restrict outside influence. It tries to protect the connections it has established.

Stop!

21

TPP business interaction & trade(TPP-Trans-Pacific Partnership free trade)

There are 11 countries in talks now. Japan and Thailand are considering attending. These talks could help expand global interaction and trade within the Pacific region. It is highly recommended that Japan attends the talks. Through the talks, the value of global trade and the potential concerns could be evaluated.

USA

Canada

Mexico

Peru

Chile

Vietnam

Malaysia

Singapore

Brunei

Australia

New Zealand

Thailand

JapanTPP

Trans-Pacific Partnership

Much more opportunities,

improved life, even more

products/services

available

22

Global business interaction & trade

World 2.0

With the internet and inexpensive global communications some believe we are in “World 2.0” in which there is only one market, the global market. They believe all markets are equal and should have free access.

23

What is World 3.0?

World 3.0

It is not World 0.0, World 1.0 or World 2.0. It is World 3.0.

Source: World 3.0 GLOBAL PROSPERITY AND HOW TO ACHIEVE IT

24

World 3.0 – Looking at connection differently

World 3.0


What only affects a local region?

What affects the globe?

What are the differences?

What is the distance?

In World 3.0 both distance and differences still matter greatly. Those differences must be explored in each case to determine the ideal level of connectedness. Some issues should be kept at the local level, other issues at the global level.

MuchLittle

25

CAGE - Differences


G-Geographic – How great are the geographic differences?

E-Economic – How great are the economic differences?

A-Administrative – How great are the administrative differences?

C-Culture – How great are the cultural differences?

MuchLittle

26

C- Cultural Differences


Social/ethnic networks – How great are social networks?

Language – How great are language/communication differences?

Religion – How great are religious differences?

Values – How different are norms, values and work ethics?

MuchLittle

27

A- Administrative Differences


Trade Bloc – Are the countries in a shared regional trading bloc?

Colonial Ties – Do the countries have a colonial history?

Currency/measurements – Is there a common currency/measurements?

Political – Are there good/poor political relations?

Legal System – Are the laws/regulations similar?

MuchLittle

28

G- Geographic Distance


Common Border – Is there a common border between the countries?

Physical Distance – Are the countries/cities close to each other?

Climate – Are there similar climates between the countries?

Remoteness – Is the country far away from other countries?

Port – Is the country landlocked or is there an available port?

MuchLittle

29

E- Economic Distance


Natural resources – Are there concerns over in raw materials?

Income – Is there a great consumer income difference?

Financial – Are there major financial differences?

Organizational – Are quality local companies available?

Supply chain – Are there developed supply chains in each country?

MuchLittle

Human resources – Is there a difference in knowhow, skills?

30

Example: New Zealand’s Bilateral Global Connectedness

Source: Global Connectedness and Bilateral Economic Linkages Which Countries? NEW ZEALAND TREASURY, Working Paper, June, 2004

These factors and ranking are to determine New Zealand’s bilateral trade barrier liberalization and promotion campaigns by close economic partners (CEP) which will produce the greatest economic and technical development.

Factors New Zealand uses for promoting country connectedness

31

Highest inward/outward FDI by countryHighest inward/outward R & D by countryHighest inward/outward goods traded by countryHighest inward/outward tourism by countryHighest inward/outward education exports by countryHighest inward/outward immigration/emigration by country

New Zealand’s Conclusion Countries to deepen R & D contact



Global R & D technological leadersCountries geographically closeCountries that have extensive trade with nowCountries have extensive FDI with nowCountries have co-investment potentialCountries receptive to collaborationCountries with common languageCountries with shared technological specialtyTargets: #1-USA, Japan, UK, Germany & Australia, Future targets: Korea, Taiwan and China

32

New Zealand’s Conclusion Countries to deepen FDI with



Have high FDI nowHave technology that could be learnedHave technology that could be appliedHave knowhow that would stimulate local

companies Could develop knowhow that is neededHave technology that could develop local

natural resourcesHave technology that is not available nowCountries with MNC with management expertise

33

New Zealand’s Conclusion Non-economic promotion to select countries



Tourism programsEducational programs

Expatriate associationsOverseas market information sharing

34

New Zealand’s Conclusion Immigration-Concerns



Most ideas are replicated or modified from previous employment.Can those ideas be imported through immigration?Ideas are spread through the mobility of key engineers. Could they be looked for?Could more direct contacts with foreign engineers and other researchers in conferences be encouraged/promoted?Could import-competing companies be acquired for technology, R&D collaboration, patents and licenses?Could consultation with experts, communications with suppliers, mergers and joint ventures/alliances be promoted?Could R&D out-sourcing and personnel exchanges be promoted to bring wealth to New Zealand?Could researcher at universities be encouraged?

35

New Zealand’s Conclusion Immigration-Concerns



As Pacific-Rim countries are targeted for FDI, trade, services and R&D, those countries also should be targeted for greater people exchange. The UK also should be targeted so as to lever off existing strong relationships in all dimensions. For the future immigration from India and Pakistan could be promoted with its growing and well-educated middle class and its fluency in English.

36

New Zealand’s Conclusion Immigration - Emigration


New Zealander living outside the country

12%of total population

Foreign population in New Zealand

22%of total population

Source: DHL Global Connectedness Index, 2011(World ranking among 125 countries (98% of world GDP and 92% of population)

37



New Zealand’s Overall Conclusion

38

New Zealand’s Conclusion Countries to deepen Trade



Pacific RimSouth Korea

ASEAN countries MexicoChinaChile

39

What global connectedness offers (ADDING)


A – Adding production volume/economies of scale D – Decreasing costs/economies of scaleD – Differentiating, offering different products

and solutions I – Intensifies competition, forces companies to improveN - Normalize risks. Success in one market

balances failures in othersG – Generates, spreads and diffuses knowledge

40

Global connectedness and pollution

Pollution


Most ecological problems reside within countries and not between countries. That is not to say pollution issues should be ignored globally. Some issues like global warming must be addressed at the global level. River pollution could be handled within a countries or possibly between two bordering countries. Global expansion could both caused and reduced pollution. Environmental influence must be considered in any global activity.

41

Global connectedness and foreign funding

Financial


Foreign direct investment (FDI) has shown to be very good for the global economy.Investment in equities by foreign investors has also shown to be good for the global economy.Foreign debt has been more problematic when it comes to overall global financial health.

42

Global connectedness and food supply/price risks

World food


Globalization has not caused unstable food prices. Only 18% of wheat, 7% of rice and 10% of all coarse grains (including corn) were traded across boarders in 2008 (The total production of these three items is 60% of world caloric intake). Food exports to overall merchandise trade is around 8.5% ~ 12.2%. This has helped stabilized supply and prices.

43

Global connectedness and unemployment

Source:

World 3.0 GLOBAL PROSPERITY AND HOW TO ACHIEVE IT

Globalization has not caused total unemployment. Labor is not a simple commodity. People have different skills, experiences, preferences, capabilities and learning potential. The cause of unemployment is very complicated. It is influenced by shifts from production to services, changing union strengths, labor-saving technology and tax changes. Most economists think technology is the greatest cause of unemployment. Global trade has far less influence. It is not written in news papers, but strong labor protection has curtailed job losses, but stifled job creation.

Jobs

44

Global connectedness and military conflict

Globalization offers diversification and choices. These choices promote understanding and respect across borders. Even when trade conflict occurs, it is far better than military conflict. Quite often the lack of mutual trading is the reasons why wars start. It is particularly true when countries hold monopolies on valuable raw materials.

There is a direct link between trade (and its occasional conflict) and war.

War Region

45

Healthy competition

Where there is learning,

product development,

personnel development,

long-term strategy

development and

low stress working

environments

Fierce fighting

Where there is

discounting,

damaging

competitor moves,

high stress, and

an overall

unattractive

image

No

competition

Where there is

complacence,

no stress,

and no

development

activities

Global connectedness & extremes of competition

Globalization and openness will create competition. It must be done so there is neither complacency or fierce fighting. Fierce fighting could be the result of the differences mentioned earlier.

46

Global Connectedness Resistance

Source: Concept based on WORLD 3.0 Global prosperity and how

to achieve it, Harvard Business Review Press, Copyright, 2011

A great deal of the wealthiest people in developing countries are people who inherited their wealth. They tend to be protectionists along with anyone in a non-competitive, declining industry.

A great deal of the wealthiest people in industrialized countries are self-made millionaires (entrepreneurs) who welcome competition.

Inherited wealthprotectionist

Interacting entrepreneur

47

Global Connectedness stimulates local growth

Connecting factors

Merchandise/service trade (35%)

Cross-boarder capital movement (35%)

Cross-boarderinformation flow (15%)

People cross-boarder movement (15%)

Source of percentages: DHL Global Connectedness Index, 201248

Higher GDP in each

country and

globally

Increased local

prosperity

More local choices.

lower costs higher quality

available

Stage #1: Many have

doubts

Stage #2: Achievement

surprise

Stage #3: Feel life

improvement

Thank You

Global Connectedness

The more we connect, the better we communicate.The more we communicate, the greater we trust.The greater we trust, the more we invest.The more we invest, the greater the opportunities

for entrepreneurs.The greater the number of entrepreneurs,

the great the chance all will prosper.

49