WHAT IS GOING ON IN THE WORLD?
World Bank January, 2013

At global level, the Institute of Public Affairs (IPA) says that a climate of distrust of the United Nations (UN), fuelled over many decades, and the erosion of its problem-solving capacities through the systematic use of blocking tactics have done much to undermine institutionalised multilateralism. Instead, attempts are being made to alleviate the pressure in the system through a move towards sectoral – in other words, thematically specialised – forums and a multitude of alternative forms of global governance outside the established multilateral institutions. The resulting fragmentation of global policy-making, combined with a proliferation of international and transnational forums, is creating new complexities in international relations and is tending to reinforce the inequalities between actors. At the same time, the increasing multi-polarity in the system offers opportunities to forge new alliances which no longer (have to) abide by the rules of conventional power politics.
Social protest movements are increasingly objecting to the lack of provision of national and global public goods by governments and their failure to control dominant market forces. The burgeoning middle classes in many developing countries are a major force to be reckoned with here. A broad debate has begun at the national and the international level about how prosperity and welfare should be defined, also in light of the interests Power will flow towards communities and individuals, and also to businesses whose leaders understand and act on the big trends shaping the future. This future looks uncertain and unstable. Hurricane Sandy was a deadly reminder of shifting climate patterns, emphasizing the need for new ways to manage the world’s resources and environment. There are growing levels of social unrest worldwide over rising inequality, austerity, unemployment, political ineptitude, institutional failure and more. Social technologies are now a central part of everyday life and work. The social generations are reshaping companies from the inside, helping them to build broader, more agile networks to create and deliver value to customers. According to the Davos Forum, mobility and connectedness will be at the heart of the future business environment: communications and marketing are moving from a focus on one-to-one relationships, to many-to-many.
As the world’s population moves towards 9 billion by 2050, resources are under pressure, exacerbated by climate change. By 2030 we will demand twice as many resources as the planet can supply – risking social unrest and conflicts as people and nations compete for ever scarcer resources. Scarcity is already driving resource price volatility and cross-border investments. New technologies and rethinking consumption will be critical in future – with businesses rather than governments likely to lead the way. Many businesses are stepping up to a new role, often with partners, to tackle social and economic challenges. Corporations are seeking to build legitimacy – and the license to operate – in the eyes of demanding consumers, employees and stakeholders who care about the impact and motivations of companies with whom they associate. But it’s also good business as companies realize mutual benefits with society. As part of this demographic shift there will be a large increase in the numbers of baby boomers in the Asian region. That is, in China, japan, korea, Singapore, Hong Kong, in particular there will be a pronounced increase in the share of elderly persons in the population. All medium to advanced economies in Asia will show such a demographic trend. At the same time some advanced economies will have a smaller group of workers, unless immigration increases. For example, Singapore is increasing its immigration levels to accommodate this demographic shift, against voter opposition. In addition, to changes in population mix there are major changes occurring in Asia as to where people live. Urbanisation will continue where rural people will move to the larger cities to gain work. Already large cities will become mega cities and continue to hold much of a regions wealth, and spending power.
Knowledge and information is a source of competitive advantage for organizations, nations and individuals. But it’s a growing challenge to retain control as mobility and the democratization of everything (commerce, politics and societies) increases – along with cybercrime and cyber war. Large corporates are particularly vulnerable to ‘hacking’ from individuals and state sponsored terrorists. Cloud intelligence will evolve into becoming an active resource in our daily lives, providing analysis and contextual advice. Virtual agents could, for example, design your family’s weekly menu based on everyone’s health profiles, fitness goals, and taste preferences, predict futurist consultants In a “Rateocracy” as envisioned by management consultant Robert Moran, organizations’ reputations are quantified, and data could be included in geographically based information systems. You might choose one restaurant over another when your mobile augmented-reality app flashes warnings about health-department citations or poor customer reviews.

Continually, economists are monitoring the growth of China and the rest of the Asian countries; the behemoths of the continent are India and China. As the year progresses, Chinese and Indian economies will be wrestling with politics, as the problems of overextended bureaucracy, political power plays, freedom, and censorship begin to trickle in these nations to slow growth. India’s economy has grown due to low labour costs resulting in manufacturers outsourcing their operations to India; and will become the world’s second largest manufacturer in the next five years. Opposite to India, China does not have 300 political parties; they have one ruling political party. The Communist Party of China has a new leader, Xi Jinping. Yes, China does not have conflicting political parties; they have one party that controls the state. Yet, this does not keep human nature from manifesting. There are many different interests in the Communist Party, and balancing those interests will again make Mr. Xi`s career interesting. The Prime Minister will be replaced by Mr. Li Kequiang, who has a reformist outlook that will be restricted by those who control state industries of finance and telecommunications. Ting Lu, an economist at Merrill Lynch has stated that Chinese GDP growth could “rebound to 7.8% year on year in the fourth quarter†, which would counter the economic downturn that China has been experiencing. Two hundred million jobs are supported by the trade sector, which has seen an increase in December 2012 by 9.6% of shipments to the United States – which is now the world’s largest consumer of Chinese products.

Ghost cities are a result of the rapid growth that China has experienced. The reason behind the quick construction is China includes these new developments in their GDP, which artificially inflates growth. However, some cities such as Ordos are empty, when they are supposed to house around a million people. Twice as much square footage was built in China in 2013 than was sold, while many Chinese families are buying second homes and leave them empty as an investment It is interesting to note cancer cities. Recently, a Chinese environmentalist challenged a Chinese official to swim in a much polluted river, and was subsequently beaten. Pollution is a serious problem in China, as the Yangtze turned red this year and the Chinese government admitted that 90% of their groundwater supply is severely polluted in some cities. Beijing has seen an explosion in demand for masks, as it is difficult to breathe in the city. Interestingly, this affects the advocates for organic foods in America. It is possible a food product from China can contain 500 ppm of mercury and still be certified organic. Consumer research shows that both Chinese and non-Chinese consumers are wary of Chinese food, including restaurant products. Countries such as Singapore will have a distinct advantage when it comes to Green credentials.

Mr. Xi will have a tough fight against corruption in his own party, and this fight will be a theme for 2013. Anti-waste campaigns are being administrated by charging an extra fee for reserving private rooms in restaurants, while government ads are recommending less luxurious lifestyles as China begins to see the beginning of a wealth gap similar to America.

Chinese relations with Mongolia will be interesting to watch in 2013. Due to large foreign investment in mining by companies such as Rio Tinto, the economy grew 17.3% in 2011, and the IMF suggested that 2013 could offer 12.2% GDP growth. Last year a new Mongolian government was elected into Parliament. In contrast to Mongolia’s exploding growth, the Singapore government is “cautiously positive†for 2013, based on fiscal cutbacks in the United States and “no outright crisis in the Eurozone†. This assessment is rather dire, as America has remained in political deadlock not making proper reforms and the Euro crisis is still a spark away from explosion. The Singaporean central bank will keep fiscal policy tight while the government slows the influx of foreign works, as total trade grew 1.1% in 2012. In opposition to Singapore’s western reliant economic predictions, Bangladesh has experienced 5-6% annual economic growth as the Guardian published a report stating global economists suggest that Bangladesh may overtake Western economies by 2050.

Overall, Asia will once again be one of the heavier indicators of global economic growth. There are many countries and events to mention, including the recent anti-deflation efforts of the Japanese central bank or a decline in the South Korea’s GDP growth, but that could be a separate article. Overall, it is expected the following will occur in 2013 for Asia: Japan will battle deflation through 2013 as already seen in the news, with full support from Western countries. This will not be an easy task, and Japan most likely will see increased volatility as the Central Bank struggles for control

For the past five years, emerging markets have accounted for two-thirds of the world’s growth. By 2020, that number is expected to grow to 75%. The heightened political risk resulting from that change would be a primary challenge even in a geopolitically stable context of US-led globalization. Set against what seemed like crippled developed countries, emerging market growth kept trade moving, commodities prices afloat, and offered attractive investment opportunities. But in a tougher overall growth environment where the US economy looks like a better bet and the potential for explosive risk in the eurozone goes away, concerns over emerging markets and their future will again receive closer attention. Emerging markets will have much more volatility and instability than the advanced industrial democracies. it’s critical to understand that emerging market downside differs wildly from country to country, and in many of them, in marked contrast to developed markets, that risk is “unbounded. Indonesia, for several years considered a star among emerging markets, now deserves considerably more caution. There, President Susilo Bambang Yudhoyono’s political capital has been steadily eroding ahead of upcoming elections, and prospects for credible economic reform have stalled.
Then there’s China, where doubling down on the present development model to safeguard stability makes us more confident on domestic economic growth–but far more worried that foreign companies and investors won’t benefit from it. The investment environment will remain opaque and more oriented toward benefiting domestic players, as China’s relative power balance vis-a-vis international actors becomes more apparent. Uncertainty over China’s short- to medium-term trajectory is an order of magnitude greater than that of any other major global economy. Russia, where opportunities are diminishing on pretty much every front but strategic resource development. President Vladimir Putin’s popularity is starting to wane, but there’s no change in his hold on power nor any willingness to reconsider his statist, highly centralized, and staggeringly corrupt approach to economic development. External relations are becoming more challenging with both Europe and the United States, and capital flight continues apace. It’s not just hard to consider Russia a “BRIC”, it’s hard to justifiably categorize it as a truly emerging market. Pakistan fits this description, with high-level political assassinations and an increasingly unstable government drawing less international aid and political interest. So too Ukraine, with poor governance, no IMF deal, and nowhere else to turn but Russia., and Argentina, with a government unwilling to improve the domestic economic or political environment.

A number of these countries will contribute the bulk of the world’s political risk in 2013. Take a serious look at China and the risks come faster than you can process: labor scarcity, pensions, inefficiency of state owned enterprises, conflicts in the East and South China Seas, clean water availability, clean air, food and commodity scarcity (and prices). None of these are new. More importantly, none of them are imminent threats to stability. As the Chinese government has shown–very effectively for more than three decades–they can manage a wide range of risks for longer than we think. Except one. The flow of information. Cyberspace is the most effective venue for the sudden exposure of personal information–whether forced or accidental. In recent months, we’ve seen more and more examples of this. In the developed world, that’s an annoyance, but the same trend in China has far more serious implications. In a Chinese economy that’s increasingly information driven, a larger, better educated middle class needs access to the internet as part of their work environment…and expects it as part of their daily life. Some of that information is directly undermining the political legitimacy of China’s top leaders. Maintaining the dominant voice in communications and information flows–and limiting online and offline information channels beyond the state–remains one of the most important political tools that the Chinese communist party holds. The widening popular discord in Hong Kong is a good example of where Beijing is headed with its contradictory approaches to information and economics; the chances of a sharper deterioration of public confidence in government will grow sharply in that city in 2013, as Hong Kong becomes a liability rather than an asset for Beijing. With nearly half of China’s population on line, and almost 400 million micro-blogging and social messaging on Weibo (China’s twitter), the Chinese government has lost that battle. Instead, China vs information 2.0 means working to be the loudest voice—and to steer the conversation
Second, there is nationalism. If you can’t beat ’em, join ’em. The Chinese leadership can’t control the online discourse, so they need to be the loudest voice online–and channel emotionally charged discussions into areas that are less threatening to Beijing. From the Chinese government’s perspective, who should be to blame when the Chinese population gets upset? Familiar domestic “enemies” like Tibetans and Uighurs will see some of the scapegoating, but we’ll also see a significant increase in hostility toward expatriates. Anti-US sentiment in China and Beijing’s willingness to take on regional battles, especially with Japan, are on the rise. If the government feels it’s starting to truly lose the struggle to contain and shape information flows, they’ll react with more crackdown, more arrests, and tighter control of the web.- isolating China further from other countries.
Japan faces a much tougher relationship with China, one that’s far more difficult to navigate than other countries in Asia. Unlike other Asian countries, where China’s leaders believe that the power balance (and the presence of Chinese minorities) benefits them sufficiently to allow for an incremental strategy, Japan is too big for that. Further, Japan doesn’t have as much importance for China to be concerned about the potential downside–China no longer needs Japan’s investment dollars because it can get much the same technology from South Korea and Taiwan. Accordingly, China is increasingly prepared to provoke. With the new Japanese election, the potential for Japan to give the Chinese further excuse to lash out is high.
But broader regional relations have become more tense recently as a more nationalistic China has veered sharply away from its “charm offensive†approach to southeast Asia, while simultaneously becoming more assertive in northeast Asia; and the United States has renewed its strategic and economic commitment to the region, giving oxygen to the hedging strategies of many regional states seeking closer ties with the United States. This in turn has led to another round of “the US is out to keep China down†thinking in Beijing, and growing tensions between the world’s two most important powers. At risk here is the decades-long pattern of East Asia as a zone where positive-sum commerce and economics trumps zero-sum geopolitical tension. For the Asia-pacific region broadly, at the core of China’s appeal has been the belief that China’s economic dynamism creates opportunities for its neighbours as well. The new conventional wisdom across much of the region is that the era of a cooperative, dynamic and non-assertive China is over and that the regime they now face will be less dynamic economically and more coercive and controlling.

More nationalist policies are also expected from Japan. The country will become more assertive in its policy postures as a new Liberal Democratic Party (LDP) government pursues a more nationalist bent. New Prime Minister Shinzo Abe has already pledged to strengthen Japan’s defense capabilities and to solidify Japanese control of the Senkaku/Diaoyu islands. Beijing will see such a move as confrontational, and it will herald another period of heightened tension in the Japan-China relationship. In Southeast Asia, Vietnam and the Philippines are likely to continue to test Beijing over territorial issues, driven by their perception of US backing and their sense that China will not ultimately push toward an actual military confrontation. In the meantime, both countries are deepening their own security ties not just with the United States, but with Australia and Japan as well.
In this context, the lack of effective East Asian regional organizations to mitigate security tensions will become increasingly apparent. While some will want ASEAN to play this role in Southeast Asia, Beijing continues to insist on a bilateral approach to territorial and security issues and has enough influence with Cambodia and Laos to prevent any unified ASEAN stance. And the United States will have to balance the need to reassure its friends and allies with the need to avoid a continued deterioration in relations with Beijing. Don’t expect a new equilibrium on these tough issues this year. In the best of circumstances, the political context for economic reform might improve following the elections. But, at this point, the more likely outcome is that India’s policymaking environment becomes even more difficult as the poll is expected to return a more fractious and divided parliament, generating a weak ruling coalition without the political support for a strong reformist push.
Add to this the energy revolution coming from the western hemisphere–unprecedented amounts of unconventional gas and oil coming from the United States, as well as exploitation of Canada’s oil sands, and offshore Brazil and Mexico also coming on line. Looking ahead, new fossil fuels are increasingly coming from the developed world and more stable developing countries. That’s a boon for the western hemisphere, and it’s helpful for global consumers writ large.
Since the financial crisis hit in 2008, we’ve been hearing a constant refrain about the impending rise of protectionism, and the threat it poses to the global economy and globalization. In the annual meetings of the G20, virtually the only issue on which there has remained a strong consensus among the leaders is the looming threat of protectionism and the need to ensure that this risk is not realized!
The gap between rich and poor continues to grow, particularly in the United States. Austerity is biting in Europe. And Japan looks toward a third lost decade. Surely class warfare will trigger significant instability across the developed world? And Japan? Two lost decades, going on three. No growth, but that has less near-term impact on personal well-being, given that Japan’s population is declining. No growth, but population is declining. Elections had low turnout, particularly among the youth. That’s worrisome in terms of engagement. But there’s no movement toward radicalism. Japan has the potential for big demonstrations on the nuclear issue and, worryingly, on China. Looking at North Korea there has been a fairly sudden leadership transition in the world’s most totalitarian state, under massive economic pressure, with an untested 28-year-old now running the country. So far, it has gone well but great uncertainty surrounds the region.
PricewaterhouseCoopers (PWC) predicts that global sports revenues will grow to US$145.3 billion over the period 2011 – 2016, at an annual compound growth rate of 3.7 per cent. Drivers include a rebound in TV advertising, the on-going migration of sports to pay TV and the return of financial services and automotive companies to sponsorship, plus a number of major sports events in London, Sochi and Brazil over the period. Gate revenues – still the biggest source of revenues in most markets, but the success stories will be those who wrap their events inside a live entertainment experience. Sponsorship – sponsors are no longer just interested in raising profile, but about deeper engagement with the fans. Media rights – sport is going social – sports organisations need to be ready? Merchandising –– requires an ability to engage with your online, global fan base? Thus technological and logistical capabilities will be in demand to support these trends.

Growing signs of globalisation in the sports market emerge every day. The NFL and NBA now host regular games in London. The Brazilian national football team plays many of its matches in Europe. Asia and the Middle East account for seven of the 19 races on the Formula 1 calendar, compared to two in Asia and none in the Middle East a decade ago. The IPL cricket tournament migrated wholesale from India to South Africa for one season before returning home. Meanwhile, sponsors are parcelling up the world by signing deals focused on specific overseas markets such as Telekom Malaysia’s recently announced licensing agreement with the English FA. At the same time, ongoing innovation in areas including sponsorship models and broadcasting rights are blurring the once clear divisions between different revenue streams, as sponsors and broadcasters seek more value in a multi-platform world, and as subscription television challenges traditional advertising-funded models. New technologies are accelerating these shifts. Amid this sweeping change, sports brands are facing new challenges in growing and monetising their supporter bases.

According to Deloittes Consulting the global sports market is achieving a gradual but robust recovery from the impact of the economic slowdown of 2008-2009.Over their four year forecast period from 2011 to 2014, PWC estimate that total world wide revenues will record modest overall growth as the industry rebounds from the decline suffered in 2009. Boosted by surges in spending in the FIFA World Cup and Olympic years of 2010 and 2012 respectively, total global sports spending will rise from US$114billion in 2009 to US$133 billion in 2013, representing compound annual growth of 3.8 percent over the four years. Stripping out the effects of major one-off events, an underlying trend of steadily rising spending emerges. Having fallen in 2009,global spending related to ongoing events is projected to rise steadily year by year, with annual growth topping 5 percent in 2013. Economic conditions will remain the main driver for spending on ongoing events, cutting into gate revenues, sponsorships and merchandising in the near term while fuelling a rebound from 2010 onwards as economic conditions improve. Long term contracts will to some degree insulate media rights from the recession, and as a result media is the only category where spending for ongoing events increased in 2009. However, weak conditions in the advertising market have been limiting renewal increases since then.: Within this overall global growth, the overall picture is one of continued modest growth in both the larger and more mature markets of North America(US and Canada) and Europe, as well as the smaller markets of Asia Pacific and Latin America.: North American revenues will expand at 3.6 percent compounded annually to remain the largest market by a wide margin in 2013-16, ahead of Europe, growing 4.1 percent. Latin America and Asia Pacific will see compound annual growth of 4.3percent and 3.9 percent respectively over the next four years. The ongoing globalisation of the sports market, combined with changes in distribution platforms and evolving commercial and economic factors, means each component of the market faces a number of challenges during the period up to 2015. Globally, sponsorship is the second biggest component of the sports market after gate revenues, and will be the fastest growing component through to 2013. Since 2008, the economic downturn has focused a rising proportion of attention and spending on the biggest sports brands with global reach and pulling-power. While these have continued to attract massive sponsorship deals and strong revenues, the mid-level brands have found it harder to attract major sponsors, while sponsorship of the smaller local sports brands has been hit by potential backers reducing discretionary spend in the economic downturn. Alongside this shift, sponsors are also demanding more clarity and specific measurement of the value they get in return for their investment, A further impact of the recession has been to accelerate the existing move towards focusing more on social responsibility and community involvement in sponsorship deals, including support for sports at the grass roots level. This trend also involves reducing the emphasis on corporate hospitality in a tough economic environment

According to the Tourism Industry Association of Canada, the tourism sector looks superficially healthy with 2% growth, but mature western destinations, such as US, Europe and Australia are losing share of the international travel market. Demand growth for business travel is projected to slow heading into 2013-15 according to Advito. Continued sluggishness in the euro zone is softening growth rates in other regions, even in historically strong driver markets like China. But demand will nonetheless continue to outpace supply, with airlines keeping a particularly tight hold on inventory. As a result, buyers should brace for low- to mid-single digit price hikes in air fares and hotel rates. During this period, Airbus foresees the need for some 27,300 passenger airliners with seating capacities of 100 seats and above, along with nearly 900 new factory-built freighter aircraft. The Advito Forecast also anticipates a more than doubling of the world’s overall passenger aircraft inventory, from 15,500 today to more than 32,500 by 2031.

Bob Brindley, principal at Advito. Says that world air fares are projected to increase, buyers will pay close attention to fare restrictions follow smarter purchasing behavior. On the hotel side, options for corporate travel include searching for internal savings such as minor downgrades in accommodation standards and expanding the number of properties used in high demand markets to improve the likelihood of booking availability.†Advito is forecasting moderate airfare increases across all regions, with the strongest demand occurring in Latin America, with expected year-over-year fare increases between 6 and 7%, and lowest in Europe (2 to 3%). North America and Asia will see fare increases between 4 and 5%, and Southwest Pacific between 2 and 4%.Disciplined capacity management by airlines will be a primary factor behind cost increases. Advito forecasts hotel average daily rate (ADR) to grow in 2013 – though not as high as hotels are pushing in early negotiations. Exceptions include Australia and Latin America, where demand is driving rates up considerably. Anticipated rate hikes include: 6 to 7% in North America; 8 to 14% in Latin America; 2 to 4% in Europe; 5 to 10% in the Middle East; 5 to 8% in Asia and 6 to 10% in Southwest Pacific. Double-digit ADR increases are probable yet again in the top rung of international gateway cities such as New York, Hong Kong and Singapore and in some Latin American cities.

Projections that the growth of the online travel market is set to slow in the Asia Pacific are way off the mark, according to the local boss of Expedia. The online travel market is forecast by PhocusWright to grow by 10% in 2013-15, a smaller rise than the 13% seen in 2011-12 as the market matures. But Expedia managing director ANZ Georg Ruebensal flatly denied a slowdown is on the cards. “I don’t believe it. Some of the macroeconomic factors haven’t really changed,” he told Travel Today. He referred to the ttractive fares as a result of the competitive aviation landscape as ongoing incentives for international travel. “People are still taking holidays,” he said. “It’s not a luxury, it’s a necessity.” In addition, Ruebensal claimed International consumers are becoming increasingly comfortable with booking travel online, evidenced by a diminishing volume of enquiries to the Expedia call centre. “The share is declining, and that’s not because we’re promoting the call centre less,” he said. “But there will always be a group of customers that feel more comfortable doing it in a shop or doing it over the phone.”Meanwhile Expedia has demonstrated its commitment to entering the mobile space with its 2010 acquisition of US-based mobile development company, Mobiata. The firm is responsible for FlightTrack, “one of the highest grossing apps in the app space”, according to Ruebensal. Since the app’s global launch in March last year, it has recorded five million downloads. Consumer use of the app has revealed a trend towards short, same day hotel bookings — the opposite of the type of booking made using a desktop.

After a highly successful 2012 which beat industry targets, Thailand’s MICE industry is poised for another dynamic year ahead. Thailand Convention and Exhibition Bureau (TCEB), a Public Organization, has revised its annual target for 2013, and is now projecting an ambitious 10% growth in MICE visitor numbers this year. As the government’s central agency responsible for coordinating and driving Thailand’s MICE sector, TCEB expects to accomplish this via three strategies – to penetrate new markets, build strategic alliances and position the industry to compete effectively in the forthcoming single market of the Asean Economic Community (AEC). TCEB expects to welcome more than 940,000 MICE visitors to Thailand this year, boosting revenues US$ 2.93 billion. “The second approach is to expand TCEB’s network of strategic alliances, in line with our mandate to strengthen industry linkages and stimulate growth..”The third approach is to accelerate implementation of TCEB’s programs to improve the industry’s readiness for the single regional market of the ASEAN Economic Community (AEC). An English-language MICE curriculum will also be developed for MICE operators. The initiative will begin in four key countries considered by MICE operators as key MICE investment targets: Laos, Myanmar, Vietnam and Indonesia (together known as LMVI). The courses will offer participants information, analyses and advice concerning guidelines for investing in LMVI, skills necessary for development of Th