globalEDGE Blog Archive September 2014

A large number of new startup companies are appearing in Israel. What is making Israel such a sought after destination for these new enterprises? Part of it could be that the government is introducing new programs that encourage innovation in the country. The online edition of Entrepreneur magazine published a story highlighting the many reasons why Israel is a hotspot for current entrepreneurs.

Argentina has been facing many economic and financial troubles these past few months. Future predictions are now showing a poor outlook for its economy, as the country is struggling with high inflation, a major decline in the value of the peso against the U.S. dollar, and more trouble involving disputes with hedge fund and holdout creditors. For a country that has had a history of economic troubles in this century, none of these things spell anything good for Argentina's future, and it only seems to be getting worse from here.

A recent U.S. Commercial Service event in Los Angeles, California focused on the export and business opportunities available in Europe for U.S. companies. A video highlighting The Discover Global Markets: Europe conference discusses the many takeaways from the conference and provides an overview of specific trade opportunities in the European market. The video also discusses how the U.S. Commercial Service can assist companies in developing a strategy to start or expand a business in Europe.

As a result of a three day summit in which Chinese President Xi Jinping visited India, both countries signed landmark deals that will open up vast commercial and trade channels for two of the most populous nations in the world. These events will help accelerate India’s economy and industry, as well as strengthen China's regional relations.

As a direct result of Russia's increasing influence and perceived expansionism into Eastern Europe, Sweden and Finland have recently agreed to tighten their relations with NATO. The two Nordic countries have long held interest in joining NATO, especially since Sweden abolished compulsory military service in 2010, but the recent push towards membership has been fueled by growing tensions with Moscow, especially by the unauthorized entry of Russian planes into their airspace. Although it is clear that both countries are joining primarily for security purposes, joining a security alliance such as NATO also holds important economic implications for the newly admitted countries and the international system.

In 2008, Iceland’s entire banking structure failed causing a devastating economic recession. This caused the economy to contract by 6.6% in 2009 and an additional 4.1% in 2010. At the time, many thought this situation was incurable and criticized Iceland’s tactics for recovery. However, those critics proved to be wrong. Last year, Iceland’s recovered economy grew faster than both the United States and European economies. Now the country is ranked high in terms of economic and political stability. How exactly did Iceland complete its remarkable economic recovery?

Since the Nordic economies are relatively small and open, exporting constitutes an important part of the economic activities in the Nordic region. Denmark, Norway, and Sweden have all had greater exports than imports every year since 1995. As the Nordic countries focus on exporting a few different products, each of them contributes to the growth of the regional Nordic economy and they together form a competitive market in the global economy.

In this gE Blog Series, we feature the Nordic countries, which consist of Denmark, Finland, Iceland, Norway, and Sweden. Together the Nordic countries make up a cultural and geographical region in Northern Europe and are integrated economically, historically, and linguistically. In the most recent Doing Business Economy Rankings by the World Bank Group, all five of the Nordic countries were ranked in the top 14 out of 189 countries. The rankings measure the ease of conducting business and reflect how conducive each country’s regulatory environment is to a business operation. In all, ten factors are used to rank the countries. A few of the most notable factors are ease of starting a business, paying taxes, trading across borders, and enforcing contracts.

Scotland has voted “no” to independence from the United Kingdom. The voting finished with a final count of 55.3% to 44.7% in favor of remaining a part of the United Kingdom and continuing the 307-year-old union. David Cameron, the prime minister of the United Kingdom, is now a little more comfortable in his position after helping lead the charge to keep the union together. He claims that the Scottish Referendum has settled the independence debate for a generation.

In July, the Chinese company HK Nicaragua Canal Development Investment Co. Ltd. (HKND Group), released a finalized route for the canal they have been contracted to build across the Central American country of Nicaragua. The Hong Kong based investment group plans to break ground on this project in December, however there is still a great deal of speculation on whether or not this canal, which has been dubbed the biggest engineering project in human history, will ever come to fruition. If this ambitious project is in fact completed, it will have a major impact on both the global freight industry, and the economy in Central America, specifically in Nicaragua.

China and India have been in an economic race for many years and although China is still ahead, the gap between the two countries is shrinking. While the public fears that China’s GDP growth will continue to decrease, India seems to be making a revolutionary growth story of its own, as the new Prime Minister Narenda Modi takes control. Many find that Modi’s economic revival strategy mirrors China's economic strategy in the early 2000s and India hopes to achieve a similar level of economic success and growth.

In 2013, global meat production reached its highest level at 308.5 million tons, a 1.4% increase from the prior year. Due to a number of factors such as growing purchasing power, urbanization, and changing diets, the WorldWatch Report has determined that meat production has increased more than fourfold since 1961. The report was accompanied by a press release titled “Peak Meat Production Strains Land and Water Resources”, which additionally stated that meat production has increased 25-fold in the last two centuries. Although this has positive side effects for those working in the meat industry, the implications for the environment could be detrimental.

Much of the talk surrounding biofuels in the past has centered on corn, wheat, soybeans, and sugarcane, which are known as first generation biofuels. These food crops were seen by many as a way to become more energy independent, as they could be processed to create ethanol fuel that in turn could replace our dependence on oil. The excitement of this prospect led many countries, such as the United States, to implement mandates requiring specific amounts of ethanol to be mixed with gasoline. These countries hoped that ethanol could help by lessening the impact of oil prices on the economy and by saving the environment from the increasing use of oil.

As companies grow and expand, some start to lose focus on their core business, as focus is called to other areas. If these expanding companies want to keep a competitive edge on competitors, they will need to find an option that will allow them to regain focus on the core business.  One of the requirements for this strategic growth of a company is intellectual outsourcing.

By 2024, it is estimated that China will have the world’s largest economy – according to global information provider IHS Economics. Earlier this week in a blog post titled “China’s Impact on the Global Economy”, Nitish spoke of China’s rebalancing trend, which is signaled by an increase in consumer imports and a decrease in imports for investment purposes. Although rebalancing may limit other countries’ investment opportunities in China, it will spur growth in China’s economy, the Asia-Pacific regional economy, and possibly even the global economy. It is predicted that a drastic increase in consumer spending will propel China past the United States to become the world’s largest economy.

As a summer filled with significant developments in the international system that have been highly influential over global business comes to an end, the world now turns its eyes to the British Isles as the vote on Scottish independence draws nearer. Although inherently a political subject, the vote that will take place on September 18th will also have important ripple effects for international business in Scotland and the United Kingdom should the movement pass. One of the primary economic concerns facing an independent Scotland includes the unresolved question regarding what currency the new state would adopt, which could have significant impacts on the business environment in Scotland.

In 2011, Portugal was hit by a severe economic crisis and the government needed an international bailout of $103 billion for austerity measures. The effects of this crisis are still relevant to this day as the unemployment rate in Portugal just rose to 14.1%. Simply put, this has been the worst recession for the Portuguese economy in more than 40 years. Now an important question remains unanswered—as a nation and a workforce, how do you recover from this economic hardship?

As the world's second biggest economy, China is a mainstay for several countries who depend on it for their international services. Most of these tend to be neighboring countries on the same continent, but China's influence is not limited to Asia alone. With major business also being done in Australia and North America, China has proved that its reach is global. As a result, the impact of its attempt to rebalance its markets and economy will not stay within its borders, and will most likely affect economic policies everywhere.

A recession is typically defined as a decline in GDP in two consecutive quarters. In the first quarter of 2014, South Africa’s economy contracted by 0.6% and only grew by 0.6% in the second quarter – narrowly avoiding a recession. Many worry that South Africa, Africa’s most advanced economy, still faces a significant risk of slipping back into a recession. South Africa’s staggering 25.5% unemployment rate is a major factor that is contributing to this risk and it must be harnessed in order for the country to experience sustained economic growth.

Nearly a decade ago, many foreign companies began or significantly increased their presence in China. The country had many attractive business advantages including relaxed regulations, cheap manufacturing costs, and low labor wages, among others. China was providing companies with every reason to invest in its country. Now foreign companies from the US, Europe and Japan are beginning to get the ‘cold-shoulder’ and feel unwelcome in China.

Over the last forty years, Luxembourg has become the financial hub in Europe and has served private and corporate clients all over the world, thanks to its extremely open market policy. The country’s financial sector is well-known globally for its expertise and sophistication. Even when most countries were suffering from the financial crisis, the banks in Luxembourg continued to earn substantial profits. According to a KPMG banking report, Luxembourg's bank profits grew by 42% in 2012. So, what has contributed to Luxembourg’s success in the global financial market and what is unique about Luxembourg’s banking industry?

A free trade agreement (FTA) is a treaty between two or more countries that reduces trade barriers and encourages transparent trading and investing among member countries. Consistently, free trade agreements have benefited United States exporters by making foreign markets more accessible and by creating a more stable and transparent trade environment. In 2012, nearly half of US goods exports went to FTA partner countries and the US manufacturing sector alone realized a $59.7 billion trade surplus. Currently, the United States has 14 free trade agreements in place with 20 countries and is in the process of negotiating two additional FTAs.

With recent disasters such as the March disappearance of flight MH370 and the July crash of flight MH17, the world is eager to see how Malaysia Airlines will recover. As an inevitable result of the disasters, the company has lost a substantial number of customers and money. Nonetheless, the airline as a whole had been losing money long before these disasters struck. Between 2011 and 2013, Malaysia Airlines lost 4.13 ringgit, the equivalent of $1.31 billion. With a fourth consecutive quarter loss predicted, Prime Minister Najib Razak is calling for major changes to take place within the company.