globalEDGE Blog Archive October 2014

In an earlier blog post, I discussed how the restructuring of China's economy by its government had the potential to affect other nations and impact the global economy. In this post, I will be discussing the economic and political struggles it is currently facing and how these issues are influencing Western nations. China is currently having trouble with its slowing economy as well as a tough anti-corruption campaign that deals with government figures and local business. Currently, the government is actively seeking solutions to these problems.

India has recently seen an explosion in startups, becoming the third largest country in terms of startup companies. These can be attributed to the rapid economic growth and the large amount of available capital in the country. Also, with all of the rapid growth the country has been undergoing, mergers and acquisitions activity has increased as well. The country added around 650 startups last year and more than 800 this year to reach 3,100 startups in total. India’s government has undergone many changes as of late, and once these changes are fully implemented and supportive of business owners, the startup scene is projected to grow even more.

In the midst of an autumn season consisting of changing leaves, dropping temperatures, and new webpage releases from globalEDGE, the brand new country government pages have now officially been published! The intention of redesigning the former government pages was not only to provide key information and data in a user-friendly format, but to highlight the aspects of foreign governments that are the most important with regards to international business as well. With this in mind, the new pages include "Government Control of Economy" and "Political Risk" indicators, general tax information, and also information on foreign policy trends, regional trade bloc memberships, and security treaties that have been shown to affect a country's global commerce policies. Furthermore, the pages also include information on the main powers of foreign governments, election processes and cycles of a country's political branches, and information on a country's heads of state and government, constitution, and government type.

Recently, an Indian activist named Kailash Satyarthi won the Nobel Peace Prize for his efforts to protect the rights of children in the global labor force. Satyarthi created a South Asian Coalition on Child Servitude which has battled child labor by raiding factories across India and liberating more than 40,000 bonded workers. He has also campaigned for increased legislature banning child labor and created a global campaign against the issue, made up of over 2,000 civil society organizations around the world. Despite Satyarthi’s efforts, child labor is still prevalent in many poor countries, and laws that directly ban the practice can do more bad than good.

“Iran is the last, large, untapped emerging market in the world.”  These were the words of Ramin Rabii, a chief executive of the top foreign investment company in Iran, following The 1st Europe-Iran Forum.  At this forum hundreds of international investors met with Iranian business leaders, and also heard from speakers such as the United Kingdom’s former foreign secretary Jack Straw.

Given the myriad of groundbreaking new biotechnology products coupled with accelerating costs of research, development, manufacturing, and regulatory mandates, the healthcare industry today finds itself at a crossroads. Consumers, hospitals, and governments are petitioning for fairly priced goods and services without compromising top-tier quality or extending risk exposure. However, the narrowing global economic environment is persuading market-leading manufactures to reevaluate not only their value chain processing, but also their premium pricing models. Under the aforementioned conditions, it is often in the best interest of suppliers, consumers, and shareholders to empower profit maximization by outsourcing core operational services for efficiency.

What is something that we have we learned from medical epidemics? Globalization is a gift and a curse. As the world continues to unite and globalize goods, services, and cultures, there is one element that is still lagging behind - the globalization of healthcare. With globalization, traveling has never been easier as you can go from and to any part of the world in 24 hours. On top of that, growing cooperation between countries has decreased the alertness on country borders. Ultimately, this has become one of the causes of the global spread of diseases and infections, since they can spread at a rapid and dismantling pace. Attempts at addressing this problem and increasing globalization have been demonstrated through medical tourism, which has made progress but also suffered some setbacks.

International trade has allowed business to grow all around the world and has created an interconnected marketplace for goods and services. However, despite these major benefits, risks have also emerged. Experts estimate that 10 percent of medicinal goods around the world are counterfeit and the sale of counterfeit medicine has risen 90% in the last five years. This phenomenon has been attributed to the increasing amount of merchandise crossing borders and the growing sophistication of counterfeit methods. How has counterfeit medicine affected the global healthcare industry?

While Liberia was trying to become the next economic superstar in Africa, Ebola came and brought a sharp break in economic growth. The decline in growth is not just happening in Liberia. Across Africa, The Ebola outbreak has brought a series of pessimistic consequences: construction has halted, people have lost jobs, and foreign investors have left. Above all, Ebola has ravaged the health sector and the agriculture industry.

In the global healthcare industry, glocalization is an emerging trend. Glocalization, a term derived from combining the words globalization and localization, describes the adaptation of global products and services to meet the needs of people in a specific geographic location. Many healthcare industry challenges are shared around the world; however, the effects of these challenges are generally influenced by local issues. A surge in global healthcare spending, along with glocalization, is presenting pharmaceutical companies with both great challenges and opportunities.

The global price of oil has fallen sharply since June, when oil prices hit $115 a barrel. Now, only four months later, the price for a barrel of oil has dropped to $85, and it could keep dropping. Global supply of oil has increased in recent years, especially in countries outside OPEC, which is one reason for the drop in prices. A more concerning reason that could be adding to the lower prices is a global drop in demand, due to slowing economies, which could signal another global economic downturn. Whatever the reasons, the suddenly low oil prices could have huge impacts around the globe, positively or negatively affecting economies that rely on the production or use of oil.

The latest segment of the How to Sell in the Americas: Trade Wind Conferences took place in Bogotá, Colombia. This segment focused on the numerous export opportunities available in Latin America and how the Trade Winds program can assist US exporters in reaching new markets. The embedded video below specifically addresses the market opportunities in Colombia, Panama, Mexico, Brazil, and Peru. Additionally, the video discusses the benefits that NAFTA, CAFTA-DR, and other free trade agreements can have on doing business abroad.

Ireland has in the works plans to change some of its tax laws. These changes could have radical effects on global companies, who as of right now, are taking advantage of Ireland's “Double Irish” tax loophole. Global companies have been looking for ways to decrease their tax liabilities and have done so by registering their companies in Ireland and moving profits to offshore tax havens like Bermuda and the Cayman Islands. The exact amount of money being sent through this process is not known but is estimated to be around tens of billions of dollars.

A new collection of resources has come to globalEDGE: the Global Best Buying Practices Video Library. This is a collection of videos, set in several different countries, that showcases case studies in the world of international retail and global buying practices. The videos are divided into four different categories: assortment planning, pricing, product promotion, and sourcing. Check out the library today!

The slogan, “Time is Money, Efficiency is Life”, has driven China to become the world’s largest manufacturing power over the last decade. But the era of cheap China seems to be drawing to an end now. A similar issue is happening in another part of the world. Australia, the old auto-manufacturing giant, is seeing an increasing number of auto-production lines drawing out of the country and moving to lower-cost destinations around the world. The global manufacturing industry is currently undergoing dramatic changes.

Under the umbrella of the financial services industry rests private equity. These organizations, which make strategic long-term investments through capital-intensive buyouts, have been at the epicenter of many economic debates in the past year. In 2005, the private equity industry saw large consolidations of size and power after the bubble burst. Rationalizing that many returns had been realized within a mature market, large private equity firms seeded many investments abroad with their higher amalgamated capital. The European and Asian markets saw the most attention given the sheer economic size and amount of restructuring opportunities. According to the Financial Times, partners of the three largest private equity firms made almost $22 billion of principal investments abroad this year.

Due to a stagnant "eurozone" economy between April and June, the United Kingdom is bracing itself for a period of economic decline, as well as contemplating the steps necessary for avoiding another lengthy recession. The slight decline of the reliable German economy, which has diminished by 0.2% in GDP growth this year, has signaled that harder times are most likely in the eurozone's future and have already affected the U.K.'s manufacturing industry and exports to mainland Europe. Five of the UK's top six major export partners reside within the eurozone (Germany, the Netherlands, France, Ireland, and Belgium), and this has prompted the nation's economists and political leaders to call for new economic policies to protect Great Britain's market interests.

In today’s globalized world where businesses are operating in countries scattered around the world, understanding different languages can be extremely advantageous. Many professionals assume that speaking a common language with other cultures is enough for success. While in fact, spoken language is only 30% of communication. Cultural differences are inevitable in global business environments. Therefore, in today’s business world it is simply not enough to share a common language. To be successful, one must develop a diverse cultural perspective.

It is no surprise that the German economy has been instrumental in balancing the struggling Eurozone. France, along with Germany, are the Eurozone’s brightest economies and are leading the way towards a much needed economic recovery. Germany has been able to weather the strained economy and has held its own during the recession with positive growth projections. However, the woes of the Eurozone countries, along with foreign factors, are beginning to wear on the German economy and are causing more setbacks than before. A survey taken by the German Ministry of Economics shows that Germany's manufacturing activity has shrunk for the first time in fifteen months, an example of how the stalling Eurozone economy is affecting Germany.

Export growth in the global economy is stagnant. China’s exports increased by 8.6% last year, yet for a decade it had produced export growth rates around 20%. Similarly, Germany’s export growth has slowed significantly, increasing by only 0.9% in 2013. Sluggish trade is a result of a slow global economic recovery that has consistently failed to meet target projections. Financial officials in some countries are contemplating currency devaluation as a measure to make exports more appealing abroad.

According to a draft of a communique that the International Monetary Fund (IMF) and World Bank Development Committee plan to release on October 11, finance and development officials are warning of major current downside risks to the global economy. The major risks that are cited include potential deflation in Europe, Japanese recession, and a slowing Chinese economy.

Michigan’s economy is reinforced by the global export market, with food and agriculture exports creating a $3.2 billion industry and supporting over 20,000 jobs. Exports of consumer food products are growing three times faster than sales in the United States due to foreign consumers’ growing purchasing power and lower trade barriers. Exporting is an essential way for Michigan companies to increase sales and profits by tapping into a far greater consumer market.

Tensions across Europe are escalating as a potential energy crisis is looming in the near future. In June of this year, Russia cut off all gas supplies to Ukraine, citing Ukraine's failure to payback debt. Ukraine has since been receiving gas from Hungary, Poland, and Slovakia. Hungary, however, suspended the flow of natural gas to Ukraine last Friday, intensifying the energy crisis in Ukraine.  Ukraine is dependent on natural gas to heat homes and to power industry during the rapidly approaching winter months.

Last week, Prime Minister Mariano Rajoy visited Beijing, China to help gain economic support for Spain. Rajoy met with the President Xi Jinping and Premier Li Keqiang to help facilitate the signing of 14 contracts, totaling about 3 billion euros ($3.8 billion). A crowd of Spanish and Chinese businesspeople were in attendance as Rajoy encouraged China to invest in Spain after its recovery from the Eurozone crisis.

Oregon-based High Impact Technology (HIT) is a company that specializes in making “smart” materials that are designed to seal up after being punctured. More than half of the company’s employees work on the international part of the business and exports are essential to HIT’s success. High Impact Technology’s products primarily have military purposes and its customers include Germany, Canada, and Russia. A recent blog post by the International Trade Administration (ITA) documents a discussion about HIT’s international business opportunities between HIT’s Director of Operations Russ Monk and ITA Senior International Trade Specialist Doug Barry.

Africa’s second biggest economy is experiencing an energy shortage that is affecting consumers and businesses across the country. Eskom, the state-owned electrical provider, has informed customers that the company cannot keep up with the increasing demand for electricity, and has asked everyone to reduce the amount of energy they use. Recently, these measures have not been enough, forcing Eskom to implement managed electrical blackouts, impacting the 95% of South Africans that rely on Eskom’s service.