Case studies on globalization & local development

1. Case studies on globalization & local development Stefania Scuderi-Italy Roney Parente -Brazil Ke Yu-China

2. Index • Overview of national responses to make globalization work for human development • Case studies • Brazil-Norway • Foreign and local investment in Mauritius

3. National responses to make globalization work for human development Globalization has opened wide the door to opportunities in the world’s markets. But markets can go too fast and squeeze the non-market activities in basically three different ways: • Fiscal squeeze • Time squeeze • Incentive squeeze

4. What can countries do to make globalization work human development? • Capture global opportunities in trade, capital flows and migration • Protect people against globalization vulnerabilities • Overcome the resources squeeze • Generate pro-poor growth • Create alliance of all actors • Formulate new strategies for managing new issues

5. Capturing new global opportunities • Enhancing trade • Attracting capital • Getting the most from migration

6. Enhancing trade Countries can accelerate growth through trade liberalization if they have sound macro economic management, good infrastructure and social service and strong governance. They need to: • Translate trade and growth into human development • Maintaining labour and environmental standards

7. Attracting capital • Attracting long-term capital flows • Managing the volatility of short term capital

8. Getting the most from migration • Egypt managed to get $4.7 billion in remittances in 1995 – close to the $6 billion it earned from Suez canal receipts, oil exports and tourism combined • The Philippines received $7 billlion in remittances in 1996 • Mexico $4 billion

9. Protecting people against vulnerabilities • Coping with changing labour market How to overcome vulnerabilities in the labour markets? • Providing education and training • Supporting the unemployed in finding jobs • Maintaining workers benefits and rights • Managing transitional labour markets • Managing the social costs of financial crises

10. Overcoming the resources squeeze The fiscal resource base of developing countries is been squeezed in four ways: • Trade liberalization • Globalization of the tax base • Tax competition • Growth of the underground economy To cope with: • Generate more revenue from direct taxes • Introduce a value added tax • Make tax laws simple • Restructure expanditures

11. Generating pro-poor growth Creating effective alliances of national actors Formulating strategies for emerging new issues

12. Brazil-Norway • Economic main characteristics • Market characteristics • Special growth sectors • Prospects for Norwegian export industry in Brazil • Norway-Brazil Trade

13. Main economic characteristics • Negative facts: • World economy lower growth in 2001 • Argentina’s economic crisis • Brazilian’s energy crisis • Positive facts: • GNP: 2000 increased by 4,5% • GNP: 2001 increased by 2,7% • Brazilian industry index increased by 2,5%

14. Main economic characteristics • Real-plan was introduced 1994 • Hyperinflation and minimal economic predictability – 1000% to 10% • Inflation 6% in 2000 and 8% 2001 • Possibility to plan the economy

15. Main economic characteristics • Foreign investment in Brazil (American dollars): • In 1993, only 1 billion • In 1999, 30 billion • In 2000, 32 billion • In 2001, 23 billion • In 1999, China was the only country to receive more foreign investments than Brazil • In 1994, introduced Real-plan - $1,00 = R$1,00 • In 1999, devaluation of the real • $1,00 = R$2,35 – Jan/2002

16. Market characteristics • World’s fifth largest population – 167,5 million • Large market opportunities • 40 million have a buying power equal to or higher than the Norwegian average • National production directed to domestic market • Emphasize the importance of increasing the export • Mercosul – FTAA (ALCA) • Complicated rules for import and duties, taxes and customs restrictions

17. Special growth sectors • The oil and gas related industry • Growing quickly on the Brazilian market • Petrobras does no longer have the monopoly • Norwegian Statoil received concession in 2001 • Telecommunication market • Large boom in the IKT sector is now over • Internet and mobile users have exploded the last 2 years • Demand in computer based solutions

18. Special growth sectors • Electricity sector • Will grow fast in the near future • New power station, improvement and expansions • Increase in the demand of energy saving solutions and efficient equipment • Other sectors • Shipbuilding industry • Agriculture • Extraction and refinement of minerals • Textile industry

19. Prospects for Norwegian export industry in Brazil • Norwegian export to Brazil representes 1% of Norway’s total export • Fish export will continue dominating Norwegian export to Brazil • Suppliers of equipment and services within the oil and gas industry • Brazil chose the European GSM-model rather than the American one, Norwegian exporters have an advantage • Environmentally friendly solutions market • Equipment and parts for use in hydro-electric power stations and transmission lines

20. Trade Norway-Brazil • Brasil is Norway’s most important partner in South-America • Brazilian market represents only 0,7% of Norway’s total export in 2001 • in 2000 the export of dried codfish represented 61% of Norway’s total export to Brazil • Machines and telecommunications equipment came in on 2nd and 3rd place, each with less than 10% of the total export

21. Trade Norway-Brazil

22. Trade Norway-Brazil • Brazil entered the 21st century with the world’s 9th largest economy • Facts that suggest that more Norwegian companies should be able to participate actively and in the long-term in the Brazilian market • The size of the market • Stable democratic governing • Wish for more foreign “actors” in the market

23. Mauritius • Background of Society • Background of Economy • History of Economic development • Factors of foreign investor’s concern • Factors of local investor’s concern • Linkage between foreign and local investors • Challenges

24. Background of Society • impact of ethnic,religious, linguistic fragmentation • Majority - Indian: Hindu, Muslim,Christians • Franco-Martitians • Chinese:Christians and Buddhists • Africans

25. Background of Economy • dependent on sugar • 99% of export • 70% employment • 1/3 of GDP • cane field-90% arable land

26. History of economic development • Independence 1968, introduced initial import subsitution industrialization policy • 1970 export promotion zone legislation passed, but few investor in 1970s • 1979-1981 crisis, down of sugar prices, escalation of oil price, political tensions, cyclone destroyed sugar crop and other infrastructure - fall off in new investment; • 1982 with change in government, adopted outward-oriented strategy to export-led growth– “export or die” • Early 80’s, foreign investment took off as a consequence

27. Factors of foreign investor’s concern • Negative: • Inconveniences by location • Lack of natural resources • Small domestic market • Uncertain sociopolitical future

28. Factors of foreign investor’s concern • Positive(pull): • Political stability and policy consistency • Sound institutions • Cheap, trainable labor force • Good economic management • Infrastructure • Preferential market access to other market • Multi-ethnic/lingual provide friendly environment

29. Factors of foreign investor’s concern • Positive(push)-quick response to external global events • Sino-British agreement over Hong Kong • Multifiber agreement • High labor cost in Hong Kong

30. Factors of local investor’s concern • How to deal with lack of land? • Take advantage of tax-free assets offered by EPZ and government • Take advantage of local bank’s attractive loan rates • Take advantage of local population linkage with Europe, India, and China • Potential in tourism

31. Linkage between foreign and local investors • Foreign cater for haven for capital, quota-free access to markets, but they also bring technical manufacturing knowledge, factory management know-how, international standards, knowledge of customers tastes and orders, training • Local bring land, management capability and capital • Global sourcing • Synergies between industries, local commerce, services and tourism-rapid GDP growth; spread from sugar industry to other economic activity

32. Challenges • Problem facing today- more expensive labor • New approaches: • Increase productivity with new tech, management • Branch out to neighboring as for basic production while keeping marketing, design and financial management; • New niches-high tech, off-shore business and Freeport services

33. Reference • http://www.nhh.no/geo/302/reading/Chapter4.pdf • http://www.exportnet.ntc.no/ • http://www.eagerproject.com/FLIresearch.pdf

34. Thank you!