Emerging Economies

What emerging realities do you see in light of the emerging economies? Which among these new economies do you feel would outpace the others? Quote examples and facts to support your argument.

The Emerging Realities

Resources no longer a curse: A search of the phrase “Resource Curse” on wikipedia generates the following outcome - The resource curse (also the paradox of plenty) refers to the paradox that countries with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. But in the new world that we are witnessing these days, the resource curse seems healed. According to Michael Porter, it is the policies that a country or region follows for its resources that make it comepetitive, but for that to happen, the country must have the resources first. I believe that over the past century, learning lessons from the OPEC countries, now nations have become more intelligent in handling their resources.

Examples: In India, there is a major brawl when Posco comes to India seeking iron ore. Brazil has attained massive trade surpluses by exporting oil and sating internal energy demand by ethanol.

War for talent: Even a blind feel of the emerging economies would reveal that the reason for which the “emerging” phrase has got attached with them is their labour pool. With the world now slowly opening up to complete globalisation, the best talent has got more seekers. The emerging economies have been gunning on this fact to find favour among FDI and outsourcing.

Examples: IT industry in India. Cheap labour in China.

Free flow of capital: Despite the fact that even today, 80% of the world’s FDI flows from developed countries to developed countries, the heartening fact is tht share of FDI to emerging countries has increased manifold. This has given birth to an era of free capital.

Examples: ECBs in India. Huge FDI inflow in China & India.

Focus on technology & innovation: The emerging economies very well understand that in this new era of global competition, tehcnology and innovation are as important as capital and manpower. Focus on these factors worldover has increased. Also countries which are technologically advanced are reaping benefits now.

Examples: Indo-US nuclear deal. Russia’s defence arms exports. Rising Indo-brazilian trade (India being the technology rich country)

Framework for finding the best placed emerging economies

First of all, for doing the exercise, we shall be concentrating only on 4 emerging economies, namely Brazil, Russia, India and China (because of the size of their economies, and their growth rate). Ever since Goldman Sachs has published the BRIC report, these countries have witnessed phenomenal growth. It remains debatable as to whether Goldman Sachs wrote a report because the countries had potential, or the countries grew because of the report. But nevertheless, the fact remains, that investments in these countries has risen ever since, they have been the key contributors in the world’s growth figures.

As for the framework, we shall be doing the analysis using a mix of economic concepts (which talk about technology, capital, and labour as key determinants of growth), Porter’s Diamond Model (which talks about factor conditions, demand conditions, strategic bent, and supporting industries), and other geo-political factors. Then looking at the overall strengths coming emanating from the analysis, we shall choose the outperformer.

Brazil

Blessed with a huge land base, the country has huge oil reserves. The CIA website gives a figure of 11.72bn bbl as proven oil reserves, but the country may well have over 90bn bbl of oil reserves in the Atlantic. The country achieved great strength by implementing the ethanol energy program, and is now an oil exporter.

The country removed the traces of inflation and economic indolence transitioning from a military government to a democratic rule. It enjoys a population of nearly 200mn, which is a huge resource. The country is the largest exporter of wheat and soya and all the other BRIC countries depend heavily on Brazil for their food grains.

Brazil enjoys a trade surplus and the government debt has fallen to 42.2% of GDP. FDI touched a new high of $34.6bn in 2007 and has been growing at 84% year on year.

Brazil is also attempting to achieve technological excellence by trading with India. India is already Brazil’s largest customer of ethanol while Brazil is keen to exploit Indian expertise in pharmaceuticals and engineering.

Strengths: Trade surplus, energy independence, agrarian advancement, literate working population
Weaknesses: Income disparity, Lack of technological expertise
Figures: GDP – $1.3tn
GDP (2050, as per BRIC & beyond) - $11.36tn
Trade surplus - $ 40bn
Foreign Exchange reserves - $180bn (Dec 31, 2007)

Russia:

Russia’s $1.28tn economy sits on the world’s largest natural gas reserves, and the tag of world’s second largest oil exporter. In the 20th century, Russia was reduced to a speck of its former glory with the demise of communism and political and economic crisis, but the country has bounced back well, and now it is again a power to reckon with.

The country’s greatest strength remains its technological advancement. With growing economic competition, both China and India would bolster their defence arsenal, and for both Russia continues to be the largest supplier of arms. Russia ended 2007 with ninth straight year of growth, averaging 7% annually since financial crisis of 1998.

The country also enjoys a huge trade and current account surplus.

However, the biggest weakness of Russia is its falling population. Russia’s population growth rate is negative, it is expected to have a population of 109mn by 2050 as against 142mn now. Accordingly, as per the BRIC & beyond report, the Russia’s growth rate shall soon fall to around 4%, and further down to 1.5% by 2040.

Strengths: Technology, oil reserves
Weaknesses: Falling political clout, declining population
Figures: GDP – $1.28tn
GDP (2050, as per BRIC & beyond) - $8.56tn
Oil Reserves – 60bn bbl
Population growth rate – negative 0.5%

India:

India as of now is mix of traditional agriculture based economy and new technology based economy. The country has in the recent past been showing high growth rate buoyed by a huge skilled manpower, and significant policy changes, however the country still faces huge challenges in the form of poverty, illiteracy, and infrastructure handicap.

The biggest strength for the country is its young population. Also, the country enjoys the largest arable land in the world. With proper policies in place, there is huge scope for advancement on the agriculture front, because as of now the agricultural productivity of the country is quite dismal.

For the country, its energy dependence on other countries is the biggest threat and weakness. India imports around 80% of its oil demand. However, with new exploration policies being exploited in house and with huge natural gas finds in the KG basin, the country is moving on the right track.

Also, India’s diplomatic ties with US (which have also lead to the landmark nuclear deal) are a going to be a great help in the future.

The entrepreneurial and strategic nature of Indians is also evident from the rise India has seen since 1991 reforms.

Strengths: Young population, huge natural resource base (iron ore, coal, thorium etc.), arable land base, strategic ties, access to technology
Weaknesses: Illiterate population, income disparity
Opportunities: Increasing agricultural productivity
Threat: Huge government debt and fiscal deficit
Figures: GDP – $1.099tn
GDP (2050, as per BRIC & beyond) - $38tn
Oil Imports – 2mn bbl/day
Public Debt – 58% of GDP
Population growth rate – 1.6%

China:

China’s growth in the past 2 decades has been ‘black swan’ story. The country’s economy has transitioned to a market-oriented economy from a closed-bow economy. Measured on PPP basis, China’s GDP stands second only to the US economy.

Major growth drivers for China have been an efficient use of its cheap labour to produce exportable goods. China has also been a beneficiary of its huge population (which is the largest in the world) which is a huge market. It attracted around $75 bn as FDI last year itself.

The country has acquired great defence and financial muscle in the past two decades, and is hungry for more.

China enjoys good amount of natural resources, and is also blessed with good oil reserves. However the country faces the following major problems.

- Corruption in China is huge problem. According to estimates, illegal activities like bribery, theft, or misspending of public funds cost China a minimum of 3% of its GDP. Lack of transparency and corruption are major hurdles to its growth.
- World-wide environmental concerns have been rising. China due to its low cost factories produces great levels of pollution. If China attempts to reign the pollution, it makes its exports uncompetitive. In the wake of growing environmental concerns, China’s exports may suffer in the future, and China has a lot riding on it.
- Third major concern for China is its aging population. The one child policy of China may hit it in the long run where its labour will no longer remain cheap.

However China is taking steps to remove these weaknesses, by moving up the value chain of value added products. It is now more known for its technological products than toys. Most of the new electrical equipment for Indian power sector are being imported from China.

Strengths: Huge market, good quantity of natural resources (coal, oil etc.), cheap labour
Weaknesses: Aging population, huge reliance on exports, falling political clout
Figures: GDP – $3.25tn
GDP (2050, as per BRIC & beyond) - $70tn
Exports – $1.22tn
Public Debt – 18% of GDP
Population growth rate – 0.6%

Looking at all the above discussion with focus on probabilities of happenings and the magnitude of their impact on the economic scene of the emerging economies, China seems to be the emerging economy that will outpace the others in the next 50 years.

Promoting Entrepreneurship

Are management graduates meant to be corporate servants or corporate masters? As a responsible member of the student community, what steps would you take to promote entrepreneurship among B-school students? Suggest implementable solutions.

“God serves men, but He is not a servant.” Even though entrepreneurship is great virtue, it does not make an entrepreneur a master, or a non-entrepreneur a servant. Established firms also create employment and open avenues for economic activity as any entrepreneurship venture (remember they were also an entrepreneurship venture one day), and need the same devotion and nurturing to survive in the tough business environment. A person serving an established business is in no way inferior to an entrepreneur. The only reason entrepreneurship needs promotion is that it is much less prevalent (looking at the existing opportunities for the same), as compared to service in established organisations, but if we treat people serving in established businesses as corporate servants, very soon this leg of employment will need promotion.

Now having talked about the need to promote entrepreneurship, let’s look at how entrepreneurship can be promoted. The only way to promote an idea is to make it a success, or to make its success more probable. Key factors required for success of an entrepreneurship venture include the following.

1.Entrepreneurial Spirit: Entrepreneurship is a testimony to the challenging spirit of mankind. It represents determined willingness to work hard and create something from nothing. Entrepreneurial spirit is the most crucial leg of the success tripod, and can sometimes achieve success in absence of the other two factors.

2.Seed capital: Most business ideas require initial capital to kick-off. If entrepreneurs are starved of this critical component of success, even the brightest business ideas can bear no fruit.

3.Management know-how and tools: For any venture to succeed in today’s competitive environment, it requires proper know-how of the business. The business idea, even though brilliant, can fall on its face if not implemented properly.

Endeavours as a student to promote Entrepreneurship

For promotion of entrepreneurship, I would address the three factors individually.

Entrepreneurial Spirit: Most people become entrepreneurs, or are willing to taste entrepreneurship because of the following factors.

Belief in a business idea - 27% respondents
Independence at work - 29% respondents
Making money - 15% respondents
Source: www.train2000.org.uk/research-reports/

But the tacit fact behind these figures is that it is pure greed that makes a person an entrepreneur, may it be greed for money, or for facing challenges and winning them over, or for rising higher & higher, and it is this greed that needs to be addressed, this greed that needs poking. For the purpose I propose creating an environment that promotes entrepreneurial spirit. We become the most like with whom we stay, and what we say. If potential entrepreneurs meet more and more with successful entrepreneurs, it pokes that greed in them, and drives home the fact that in case of entrepreneurship, even if the frequency of success is low, the expected value of returns is high enough to compensate for it. I, as a student shall strive to arrange more and more talks by successful entrepreneurs for potential entrepreneurs to create a successful aura around entrepreneurial venturing. Also, by creating a students’ club where the topic is frequently discussed, the vague imaginations of people can be converted to dreams.

Seed Capital: These days, for a good project, it is not difficult to find money. One just needs to have the right contacts. To provide this platform, where potential entrepreneurs can find seed capital, I will strive to put in place a dedicated fund that can be fed by contributions from alumni, successful entrepreneurs, industrialists and professors. The fund would again be managed by these people only to provide seed capital to one deserving business idea per year. Such a fund would be self sustaining as successful entrepreneurs who got initial capital from the fund would be more than willing to contribute to the fund in the future.

Also, I shall strive to arrange business plan competitions which are judged by angel investors so as to provide seed capital to business ideas they feel deserving. I shall also establish contacts with networks of investors, and provide useful information and contacts to potential entrepreneurs.

Management know-how & tools: Most of the cases discussed & taught in business schools these days concern well established firms. Almost all cases figure companies which are already public and have significant financial numbers. Even though these cases do provide management insight, such cases cannot be compared with the situation faced by start-up ventures. The dynamics of such ventures are completely different from established businesses. However, cases on start-up ventures are available and need inclusion in the curriculum. I shall convince faculty members to discuss such cases so as to help potential entrepreneurs take first step forward in their ventures.

I hope such efforts will promote entrepreneurship amongst business school students.

Rajandeep Singh - a description

One discovers oneself with time. Over a span of 24 years, I have discovered and rediscovered myself. And it is this knowledge that I am pouring over here.

I am a person who is driven by challenges. It is the difficulty in an assignment that excites me most, and success, that gives me pleasure. Also, I have a dominating inclination towards taking decisions. I believe in taking quick, correct and firm decisions to steer things towards respective goals. It is this force that has been guiding my career right through.

I am also a person who is most passionate about my work. I don’t believe in (what has come to be known as) work-life balance, and deeply believe that life is all about work. My long term goal is to reach a leadership position where I shall be able to make decisions of significant business impact, creating value, both for the society, and my organisation. And I’ve been honing my skills accordingly. I did my engineering in Mechanical Engineering discipline. Thereafter I moved to IOL Chemicals & Pharmaceuticals Limited (Trident Group). Here, my stint at site projects gave me lessons on pragmatic thinking, and on-the-toes decision making. Having completed two capacity enhancement projects with IOL, I moved to Jindal Stainless Limited in search of greater challenges. Here, my experience in project management gave me a peep into how things move at the top, and fostered in me a bent to think ahead. Finally to look into the Consultants vertex of the projects triangle, I moved to Larsen & Toubro Limited. I worked for L&T for 14 months before joining MDI, Gurgaon. And here, with management studies, I wish to complete the first level of the learning spiral.

Over the years, I have found myself to be a person with an open mind. I am therefore good at unlearning and relearning. I am not easily swayed by notions; I but rely on facts and an independent judgement for making opinions and taking decisions. The same has been a key success factor for me at MDI.

As for my weaknesses, I am a little impatient. May it be finding out the result of an examination or taking a decision, I like things to move quickly. I understand that this tendency can cost dearly someday and have been working to unroot the same. However I also understand that the same tendency can be moulded into a strength by being more selective on matters to be impatient about.

Regarding my roots, I come from a humble family in Patiala (where I was born and brought up). My father is a Senior Branch Manager with Punjab & Sind Bank. My mother, even though a post graduate, has been busy in managing our home and architecting my success by inculcating values, rather than utilising her qualifications to add to the family income. And it is because of her that I believe in the equality of all castes, religions, nationalities and other boundaries diving us. And it is because of her that I have a vision of creating a world where everyone (regardless of what the colour of his skin is) has the opportunity to achieve what he / she deserves.

In my free time, I sometimes like to write. The topics of my writings have been as diverse as philosophy and politics. I also run a weblog (www.solitude-is-bliss.spaces.live.com) to display my writings.

I wish I am able to achieve my goal standing on the building blocks of honesty, humility and commitment.

Leader ....

Its difficult to find a more researched, more discussed, more debated topic than Leadership. Different people have different views on the subject, and very diverse ones sometimes. Just the other day, I had a chance to listen to a world renowned professor on the subject when he was explaining how his research has led to the conclusion that one needs to have 6 Cs to become a leader – Courage, commitment (and four other which I don’t remember), and that how leadership can be induced in individuals. At the same time, when questioned, he couldn’t strongly refute the school of thought which says that leaders are born, and people cannot be trained to be leaders.

For me however, there is no ambiguity as to who can be a leader. I don’t have any aesthetically placed 6 Cs or long theories on the topic, but a very simple understanding. A leader is a person with a vision. It doesn’t matter if he has the 6 Cs or 10 Ls or 4 Ps. It doesn’t matter if he is a good speaker, or a psychologist, a white or coloured for that matter. It is not these letters or abilities that make him a visionary, but the vision that induces all these qualities in him. Look at the word itself – leader. The word itself purports a person who directs others through dark, leads them through uncertainty and ambiguity, and how – by an independent, unborrowed vision.

And this vision has to be ambitious. A Himalayan vision creates Himalayan energy which is the source of all courage and commitment – for the leader and for the followers. It is the challenge in the vision that motivates people to follow it; to see it as a dream and pursue it as it was God. The vision also has to be inclusive. A vision for oneself or for a few is no vision, it is only day-dreaming. It cannot create leaders. And finally, the vision has to be backed by belief. A vision with no belief cannot induce action (sacrifice is a far cry).

And when such a vision strikes a man, he / she remains no mere mortal. He / she then acquires the 6 Cs, or the 4 Ps, or the 20 Ts or what have you by the force of the vision itself. It is the same force that converted Aung San Suu Kyi from an ordinary young girl to the voice of a nation. It is this same force that transformed a boy in his teens to become Shaheed-e-azam Sardar Bhagat Singh. It is this same force that evolved an ordinary lawyer to become the Mahatma, the father of the nation.

And this vision cannot be induced; this vision cannot be taught; people cannot be trained to have a vision. This vision has to be unborrowed and unguided, unchained and unquestioned to be able womb leaders. The vision is greater, larger and holier than the leader it produces. Leaders are neither born geniuses, nor trained professionals, but they are all a product of a grand vision.

I, me, myself

Ever since I was a child (small…..no, immature enough to be recognised by that set of syllables), I wanted to fly, move across levels of altitude and sight lands unknown. But it is now, that I realise, that my innermost volition was just be to free, and the desire to be high up physically, was just a morph.

Yes, I want to be free. Free from the clutches of beliefs, notions and emotions, that barb the freedom of thoughts and existence……..free from social bounds, that don’t recognise, or even strive to accept relations beyond it periphery (a very narrow one…..huh)……free from the classifications and hollow partitions that try to dictate my stimuli. I want to be free of heads that divide me, and may be, define me as well. Yes, I don’t want to be called a Sikh, or a Punjabi, or an Indian for that matter. I don’t want to be divided, and I don’t want to be defined. Yes, I want to stay unquestioned and unjustified.

Don’t get me wrong. I don’t want to be separated, but I do want to be different. I don’t want to defy society, or humanity, but I do wish to redefine them (not for me only, but not by dictate also). I want to feel the ebullient and ecstatic wind passing through my being, with my arms stretched out to hug the magnanimity, idyll and blind carelessness that freedom exudes. I want to let the music inject itself into my existence, so that my volitions are not dictated by tangible mirages, but by the purity of immortal, immaterial and unapproachable, but coherent, waves that sanctify senses. I want to live the turbulence of waves, which follow no directions or motives. I want to reflect in the clear and continuous elixir of simplicity (that is pure enough not to bear a colour even), like the golden rays of the sun. I want to glisten in the face of night, like stars that don’t show up in light, but deluge the senses with their grace at the slightest invitation. I want to vanish in the air like fragments of dust, to separate myself from all that binds me, and become a part of everything and nothing at the same time, by the virtue of vicinity that invisibility and omnipresence bears. I don’t want to close my eyes to obviate chances of looking at the undesirable, I but want to be blind to the boundaries that sect desires and despises. I don’t want to judge, I don’t want to test, I don’t want to analyse; I just want to believe, I just want to agree, I just want to love.

It is not wrong that I don’t see riches with aspiration, that I don’t lay eyes on things that glitter, and faces that glisten. But the truth is (I don’t know why), that my eyes can’t see them. They seem to be immune to the affliction that disparages simplicity or low standard (as somebody might define) and the school of thought that advocates harsh, bold and clear boundaries to separate, rather than a gradual, dim, blurring of factions (factions really …. because may be, all is one), like the bands of a rainbow.