Archive for the ‘General’ Category

Donald Sull, professor of strategic and international management at the London Business School, write a nice little piece with some business cases:

Chinese appliance maker Haier Group discovered that customers in one rural province used its clothes washing machines to clean vegetables. Hearing this, a product manager spotted an opportunity. She had company engineers install wider drain pipes and coarser filters that wouldn’t clog with vegetable peels, and then added pictures of local produce and instructions on how to wash vegetables safely. This innovation, along with others including a washing machine designed to make goat’s-milk cheese, helped Haier win share in China’s rural provinces, while avoiding the cutthroat price wars that plagued the country’s appliance industry.

More examples in the full article (registration required).

A new IMF working paper by Nese Erbil explains:

This paper examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures – government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance – and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample. Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group.

Among the conclusions:

The results confirm that political and institutional factors, as well as financing constraints, play a role in the cyclicality of fiscal policies in the OPCs. Most of the variables on the quality of institutions and the political structure appear to be significant for the low- income group. Two of the variables are significant for the middle-income countries: the composite institution index and checks and balances. None of the institutional variables turns out to be significant for the high-income countries.21 Domestic financing constraints seem to matter for the low-income group. But fiscal policy is affected more by the external financing constraint in the middle- and high-income groups, as they may be more integrated into the global financial system than the low-income countries.

Read the rest of this entry »

To better help our customers, we at TradeFlow21 always stride to keep up to date with the distilled wisdom of those working in analysis and understanding of other cultures. Last June Jeannie L. Johnson and Matthew T. Berrett published in the CIA Studies in Intelligence a paper titled “Cultural Topography: A New Research Tool for Intelligence Analysis.” [1]  Among several examples we find this one:

US analysts vastly underestimated the duration and expense of the 1999 [bombing campaign against Serbia], in part because they undervalued the role of historic narratives of victory and defeat. Serbia’s national holiday is not a celebration of a past battlefield victory but of a glorious defeat in 1389 at the hands of the Ottoman Turks. Serbs celebrate the valor of the war’s hero, Prince Lazar, who received a heavenly visitation on the eve of battle and was told that unless he surrendered he faced certain defeat the next day. Given the choice, Lazar declared that it was better to die in battle than to live in shame. He did precisely that—and became cemented in Serbian legend.

[...]

Understanding the weight of this narrative for Serbs in defining honorable conduct during war would probably have disabused planners of the idea that the bombing campaign would be over quickly. Instead of projecting a three-day campaign, we might have helped policymakers plan for a campaign closer to the almost 80 days it eventually took.

Read the rest of this entry »

Excerpts from the World Bank new publication on MENA:

There are historic opportunities for greater openness and citizen participation in economies across the Middle East and North Africa (MENA) that, if strongly managed over the transitions ahead, could see a significant boost to economic growth and living standards in the medium term.
Read the rest of this entry »

From Apple CEO Steve Jobs’s 2005 commencement address at Stanford University:

I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn’t interest me, and begin dropping in on the ones that looked interesting.

It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the seven miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Read the rest of this entry »

TradeFlow21 managing partner Steven Towns recently reviewed Trade Myths: Globalization has left trade balances behind, a profound book weighing in at all of 75 pages with an additional ten pages of charts that bust the same myths already exposed in prose. The author, Dr. Enzio von Pfeil, is a Hong Kong-based investment adviser and fund manager. A regular in the financial media in Asia, he is a former chief regional economist at leading London-based investment banks in Hong Kong. Enzio has long studied matters related to trade, and fortunately for those looking for perspective not readily found in the mainstream media, particularly in the U.S., he has penned Trade Myths. Of the five trade myths he discusses, in each instance, Enzio explains how misguided and anachronistic beliefs about trade could lead to an impaired U.S. economy with a simultaneous jump in interest rates having widespread repercussions. The book review begins below followed by Q&A. Read the rest of this entry »

1) Actual (Strategic) Value of “Distressed” Real Estate: Dubai World, the government-affiliated parent company under scrutiny, is strapped with an estimated $24B in debt,including $7.3B in deteriorating real estate assets held by their Nakheel subsidiary. On paper, these assets are distressed. In brick-and-mortar reality, they include new-to-market commercial and residential units that help define the Dubai skyline. Vacancy rates are transitory, but quality real estate will return value if strategically positioned as part of a larger initiative or economic plan. A shift, for example, in the commercial focus from financial services and tourism to energy, such as the creation of a solar-powered city, could restart investment and development.

2) Primacy of DP World: Dubai World’s marine and port subsidiary, DP World, maintains deep-water terminals in over 30 countries from the Americas to Asia. It is simply too valuable a commodity (commercially and politically) for the government to abandon to creditors in courts. DP World’s port presence across the globe is central to the UAE’s identity and prestige.

3) Capitalism 2.0: The Dubai crisis was an inevitable and necessary step in the maturation process of an emerging free-market economy. Sheik Mohammed bin Rashid Al Maktoum’s undisciplined approach to development, coupled with investors who naively assumed their bets were covered by state revenues derived from oil, created conditions that plunged the Emirate $80B in debt. Despite the poor timing of Dubai  World’s announcement of a standstill just prior to the Muslim holiday of Eid al-Adha, Dubai and its flagship company should emerge from the crisis with a new sense of purpose and propriety. Abu Dhabi will likely take the lead in helping Dubai restructure its financial institutions and reshape its strategic thinking as part of a wider effort to regain a measure of market integrity and public trust.

4) Human Capital: Dubai’s “oil reserves” are its people. They are educated (77.9% literacy rate), able, and multi-lingual with commands of Arabic, Persian, English, Hindi, and Urdu. The  serious, sophisticated investor recognizes this as a key attribute in any successful venture. Human capital is the critical “X factor” on a balance sheet.

A published report by NCB Capital, a Saudi subsidiary of the National Commercial Bank, cited a study by the German Aerospace Centre that estimates the region’s deserts “receive annually average solar energy equivalent to 1.5m barrels of oil per sq km.” The Arabian Desert, which covers an area of 2.3m sq km (900,000 sq mi), would yield the equivalent of 1.1 trillion barrels of oil per year, assuming solar panels were erected on one-third of the available land. The UAE’s recent committment to support 7 percent of its energy needs from renewable sources by 2020 further suggests that other Middle East states, particularly those where shortfalls are reportedly “looming,” may soon follow suit (see full article in Financial Times, via Zawya). From TradeFlow21′s perspective, the commercial opportunities for green industries, including water desalination/filtration, are immediate and immense. For more information on doing business in the Middle East, contact Lew Nescott, Jr. at 203.848.7257.

See clips below from The National Newspaper’s coverage of James B. Smith’s (the recently appointed U.S. Ambassador to Saudi Arabia) poignant talk to approximately 100 U.S. company representatives in Riyadh. TradeFlow21 lauds Ambassador Smith for his timely and critical assessment — hopefully a wake up call for businesses.

For information on the latest global economic competitiveness ranking and how the GCC ranks (note Saudi Arabia moved up to #13 this year and is knocking on the door for a top-10 spot), see Doing Business 2010: Saudi Arabia nears goal; UAE climbs ranks.

clipped from www.thenational.ae Diplomat warns US firms are losing edge RIYADH // The new US ambassador to Saudi Arabia yesterday warned American businesses to wake up to the fact that they are losing their edge in an increasingly competitive Saudi market. Ambassador James B Smith, a retired air force general, also told his audience of about 100 US company representatives that it was time for both Saudis and Americans to “rethink some opinions” of each other forged in the wake of the September 11 terrorist attacks. Noting that many US companies are “on the sidelines waiting to see what’s going to happen in Saudi Arabia”, he added: “My message back to them is: What’s happening is the train has already left the station. You are losing market share to India, China, Russia and if you don’t move you’re never gonna catch the train.”

Last week, the Financial Times reported that a UAE state-linked investment firm planned to acquire a 32 percent stake in Sir Richard Branson’s civilian space venture, Virgin Galactic.  Aabar investments will initially shell out $280 million, plus another $100 million for development of a satellite launch-capable spacecraft. Aabar will also build a science center and spaceport facilities in Abu Dhabi. The implications of this venture cannot be overstated. They are as vast as space itself. The Virgin-Aabar alliance is perhaps a harbinger of the future for a region where cash-rich nations, backed by solvent banks and sovereign funds, aggressively pursue the next generation of disruptive technologies derived from aeronautical research and exploration. The potential commercial as well as military (i.e. security) advantages of a successful space program could dramatically alter the geo-political landscape of the greater Middle East, creating dynamic economies where stakeholders also share in maintaining regional security.