THE DUBAI CIRQUE DE SOLEIL, MASDAR INVESTS IN CLEAN ENERGY THAKSIN BUYS (AND SELLS) MANCHESTER CITY, and KHAZANAH AND TEMASEK BECOME GLOBAL FORCES:
GLOBAL CAPITAL MARKETS, SOVEREIGN FUNDS AND ECONOMIC REALIGNMENT in 2009
Introduction to Globalization and Capital Markets
Rotman September 9th 2008
Jim de Wilde
www.jimdewilde.net
THE DUBAI CIRQUE DU SOLEIL: The government of Dubai wants to make Dubai the centre of the world’s entertainment industry. Cirque due Soleil has gone from being a fusion of Chinese acrobatic dance, street entertainment and Montreal creative cultural fusion to being a multi-billion global product. The investment of the Dubai government in the Cirque is one of the Canadian business stories of the year and is filled with implications for the way the global economy operates.
THAKSIN ACQUIRES MANCHESTER CITY: One doesn’t have to be a world football fan to know the commercial value of the positional good called an English Premier Division football team. Abramovich’s purchase of Chelsea was the arrival of new Russian capital into the major centres of the world. After Prime Minister Thaksin Shinawatra left power in Thailand, having failed to manage the mix of globalization and privatization that comes from selling domestic telecommunications capacities to foreign (in this case Singaporean) investors, he becomes one of the twenty-two owners of this unique positional good, in this case Manchester City.
MASDAR’s CLEAN TECH FUND: In the new planning for a post-oil economy, there is a tremendous advantage if one does not have to meet quarterly expectations. In this new characteristic of the global economy, the Masdar Clean Tech Fund in Abu Dhabi is well-positioned for long term growth.
KHAZANAH AND TEMASEK BECOME GLOBAL PLAYERS: The Malaysian and Singapore sovereign wealth funds are examples of new players with increasing global exposure and global interest. A quick look at the Khazanah and Temasek portfolios shows that they are part of the globalization of investment expertise, and are new partners and players in the global economy. Khazanah’s investment’s in Chinese waste-to-energy technologies this summer is another template for deal making and a good case study for this discussion.
There is a great deal of activity and growth in the global economy in the fall of 2008, from these kinds of case studies. But there is also a real nervousness about how the global economy as we know it comes out of a perfect storm. Several negative factors have come into play and we seem to lack a political consensus about how to deal with them. This reflects the confusion in the way they are discussed in the world’s Business Schools. What is going on and how do we analyze them more successfully? As public-policy makers, as investment decision-makers, as citizens of the planet. That is what this course is about.
Let’s start with the perfect storm:
:
(i) CDOs, the new derivatives and the tyranny of mathematical models:
badly understood financial instruments re-sold without adequate calculation of inherent risks in disguised “new models”, the derivatives and mathematical model problem one more time but with higher stakes in a more fragile economy with the collateralized debt obligations (CDOs) at the heart of the mortgage and banking crises;
(ii) The power of petro-capital in global capital formation: There is considerable uncertainty over the role of petro-capital in global capital formation. This overlaps with the new role of sovereign wealth funds, but speaks also to the insecurities of a world economy that has taken a long time to move from its carbon dependency and to a more financially stable and predictable source of energy. The political uncertainty over its role and function of petro-capital in the global economy is once again with us. The volatility of oil prices is the only constant as interruptions of supply can come from the Georgian route of the Baku-Tbilisi-Ceyhan pipeline, and even more importantly, the disinvestment from Russian oil and gas resulting from the Russian behaviour over the TNK-BP deal ;
(iii) The rise of sovereign wealth funds has everyone dusting off their economic theory text books: The rise of new sources of economic power in private equity funds in Europe and sovereign funds in China, the Emirates, Singapore and now possibly Saudi Arabia and the reemergence of new players from India, Brazil and Russia affects the investment market for acquisitions and mergers. How will their pattern of investment differ, if at all, from that of Goldman Sachs or the Royal Bank of Scotland?
(iv) Klepto-capital makes rational economic their and the natural efficiency of markets much more theoretical: The increasingly disruptive effects of klepto-capital, whether it is drug cartel money in Latin America, Afghanistan or southeast Asia, the flow of currencies from para-state organizations in Russia and eastern Europe, or petro-capital transformed into private wealth in, to pick the extreme case, Equatorial Guinea.
The convergence of all these phenomena mean that as political economy meets international finance, we are seeing a world which in unrecognizable through the lenses that marked the early days of globalization.
Optimists, in which camp I count myself, say this is the growing pains of globalization. Pessimists see some structural flaws in the way international capital is organized. Until the optimists prevail, there will be continuing uncertainty in the global economy, and difficulty channeling capital to growth opportunities.
The answers written on the op-ed pages of the world’s newspapers tend to be of three kinds: (i) from academics who want to defend a particular intellectual perspective on the world (the importance of more tools for analysis of risk is a favorite); (ii) from institutional investors with a position to defend (hedge funds have not destabilized the system); and (iii) from a geopolitics based on nervousness about the rise of new centres of economic power and their accountability.
In this course, we are closer to the third position, once again seeing a return to Schumpeterian political economy with its emphasis on the preconditions for innovation in rapidly changing markets and the economic psychology of Keynesians who understood that there is an art to consumer confidence. The intellectual skills requires to navigate twenty first century capital markets are both analytical skills of political economy and a broad understanding of the economic history of innovation in capitalist economies and how that is applicable to the global economy we are currently designing through the day-to-day market decisions and the search for a new global financial architecture.
Canada has to assess how the new trends: the rise of sovereign funds and petro-capital, the competing centres of capital formation with different systems of financial accountability, the credit crisis caused by the failure of financial markets to measure risk in a manner that captured the fallacious assumptions of “technical” (i.e. computer-driven) financial instruments. Like CGI (computer-generated imaging) in films, they should be servants of the plot, not an end in themselves. All the market-disrupting technological innovations (derivatives in the 1990s, CDOs in the 2000s) were examples of the technology not serving the goals of value creation.
The global economy in which we start this term’s analysis is one which is sorting out the misuse of financial instruments, the failure to create a capital market immunized from the impact of petro-capital, and the geopolitics of sovereign funds. The fluctuation of oil-prices is a constant which will lead to more complex decision-making. Let’s start with some trends which are going to impact throughout the next few months and then see what strategies are accessible to investors and financial decision-makers operating within the Canadian dollar-zone. It also is hoped that the implications of this analysis apply elsewhere in B-Schools where the appropriate decision-making models for the 21st Century are being shaped.
It is impossible to act effectively within the new political economy unless one has some sense of how these changes affect decision-makers. Arnab Das of Dresdner Kleinwort’s July 2008 Financial Times essay on SWF (sovereign wealth funds) is an excellent starting point for a discussion on the range of future strategies in creating value in the global economy. The analysis of the strategic decision of sovereign wealth funds creates a need for a different framework of political economy and international finance. The Monitor Company’s report on the role and strategies of sovereign wealth funds makes an excellent starting point for analysis. Let us add four case studies:
(1) Nakheel buys into the Cirque du Soleil : The Cirque has become a major content producer for Los Vegas . It is a multi-billion dollar Canadian asset, whose expansion capital now comes from sovereign wealth funds based on Gulf Arab oil.
(2) Temasek helps Thaksin take control of Shin Corporation, Thailand’s largest mobile telecommunications company: The economic nationalism engendered from the reaction to Thaksin and the Shin decision resulted in a change in Thailand’s government and an ongoing crisis in terms of economic integration in Southeast Asia.
(3) Norway’s sovereign wealth fund owns 1% of Europe’s assets: The role of Norway’s steady, ethically-driven investment strategy has a profound implication on the development of European business.
(4) China investment in Blackstone a mixed success story: This investment was part of a learning curve for Chinese investors, an excellent exit for Blackstone’s highly innovative founders and part of the integration of China into the global economy.
(5) How do capital markets create stability for energy pricing and investing? J.P. Morgan’s President Jamie Dimon’s proposal at Aspen that governments create a more stable capital market environment by taxing oil and gas to simulate the effects of rising oil prices and facilitate structural adjustment.
Let us start with three basic observations:
(1) We are living in the twilight of the petro-state. All the world’s economic activities are being targeted towards fossil fuel substitution. But right now, the capital markets reflect the significant power of oil (Abu Dhabi, Norway and organized sovereign wealth, China, Singapore) are a significant part of capital formation in the world. The formation of capital from resource wealth will be replaced by other aspects of global capital markets: the formation of wealth from environmental conservation, from industrial ecology and conversion to agricultural productivity, real estate denominated transactions). Right now, Abu Dhabi has wealth from oil which it can convert into venture capital that diversifies the UAE portfolio, as in the role of Masdar.
The next generation of capital formation will come from new financial techniques:
(a) Real estate value of common lands – e.g. what is the beach property of Namibia worth? Who owns it?
(b) How much is it worth to pay Indonesia, Brazil or Papua and New Guinea not to harvest rain forests: how much will the Indonesia Rainforest Conservation Sovereign Fund be worth in 2008? How will it be capitalized? What new bond and financial instruments will be required?
(c) How do we create incentives for the creation of agriculturally productive land from shrub and desert? What is the ownership structure of the Sahel? Will we have a Mali High Protein Yield per Acre sovereign fund in the year 2008? How will it be collateralized?
(d) In the two decade long twilight of the petro-state, what will happen to the revenues coming from Sao Tome e Principe’s oil wealth? How could it be turned into a Gulf of Guinea pension fund? Who will the depositors be? What principles of accountability will there be for the actions of the fund or will it be spent the way Saudi and Russian petro euros are currently spent?
(2) Cross-border investment instruments will transform many regional economies. Let us take the example of Ogaden, the probably illegally transferred desert land “given” to the Ethiopians by the British at the end of the Second World War. Now that it has oil, what are the investment models which could result in mutual benefits from economic development?
(3) The power of the capital markets inevitably triggers economic nationalist responses. The Temasek-Shin case in Thailand is just the canary in the coal mine. However, most of our economic theories treat economic nationalism as an inherently negative phenomenon, which means that theoretically we should let the Saudis and Chinese purchase anything they want in a highly liquid international marketplace. Public policies will be designing market-sensitive economic nationalist instruments. In this sense, the CDP model in Quebec and instruments like Norsk Hydro in Norway become if not prototypes, new templates from which we can design economic strategies in the emerging global economy.
In a world where Thaksin leaves and buys a good English football team, and then sells it to an Abu Dhabi investment group, and where Dubai uses an innovative entertainment product from Montreal to establish its leadership over Los Vegas as a global entertainment destination, we are dealing with different instruments and means of value creation. We are in a period of adjustment now to new patterns of growth and the instruments which worked in a different economic period have now proven to be toxic. Collateralized debt obligations (CDOs), the so-called credit crunch, were clever little instruments for people with access to computerized trading to gain an advantage in a world of expansion. The winners made 14.9% returns, the losers 14.3% returns. Now we are in a different world requiring very different business strengths: one of the fundamental new skills is an understanding of how global political economy and international capital markets combine to create new strategies and new sources of competitive advantage in the emerging really global economy.
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SOVEREIGN
FUNDS, NEW PATTERNS OF GLOBAL ECONOMIC GROWTH AND
HARMONIZATION OF RULES IN INTERNATIONAL
POLITICS
Opening
class Rotman course on Globalization, Capital Market
Innovations and Sustainable Prosperity
Jim de
Wilde
September
2007
www.jimdewilde.net
There are some new patterns of activity in the
global economy.
The first is that there are new categories of
growth activity, from motorcycle companies in
India to design studios
in Shanghai. From
investment behaviour, restructuring of petrochemical
companies in Thailand and
commercialization of resource production in Kazakhstan
create new opportunities for investors.
A slowing of growth in the North American economy
can be compensated by enhanced activities in new
markets.
The competition for new investors can create an
auction for assets. This is
what is called the management of global capital
markets.
With this comes new challenges: the
globalization of labour gives a competitive advantage to
those whose manufacturing facilities lack both unions
and safety regulations, the free
movement of capital means that state-controlled capital
from Dubai or China can behave the same way as
savings-formed capital among institutional investors in
Switzerland, Japan or Canada or personal investing from
Canadians, Americans or Germans investing through public
exchanges,
the concentration of expertise in the hands of
private equity players and hedge funds creates new
issues of accountability.
Let us start the course with some case studies
that illustrate these changes in global capital markets,
political economy and economic security. From these we
can start to discern future patterns of global economic
activity, wealth-creation and financial risk:
(i)
Sovereign
wealth funds and global
investment hollowing out and reciprocity: the role of
sovereign funds has transformed the logic of trade and
investment liberalization, but also assumptions about
capital market activities and behaviour.
If we start by looking at the investment
strategies of Singapore and Dubai, Dubai’s oversees investment
strategy, China and Qatar’s as
case studies; we start to see the shape of new economic
activity.
(ii)
Dubai
attempts to buy the Auckland airport as a gateway for
Pacific travel. The bid is
withdrawn, allowing a possible Canadian investment from
Canada
Pension Fund Investment Board.
(iii)
China and
Blackstone. The
Chinese government investment activities involve the
substantial investment of Blackstone
(iv)
Qatar shops
for Sainsbury. The interest of
Gulf capital in restructuring the European retain sector
makes the Sainsbury case particularly interesting and
relevant.
Sectoral
restructuring:
(v)
Russian
builder of nuclear plants.
Atomstroyexport has developed a strategy for exporting
nuclear reactors and in the process is reshaping the
global nuclear energy industry. The competitive
structure of the market between Areva, Siemens,
GE and Atomstroyexport are revealing of new patterns of
global competition with implications for geostrategic
debates about nuclear power.
(vi)
Thai
petrochemicals. Thailand’s
plans to become a world leader in petrochemicals are
another example of national strategies potentially
restructuring global capacities in a key
sector.
New capital market
centres:
(vii)
FT on which
Asian centre rivals NY and London
. The
spikes in the global economy are creating substantially
different roles for Asian markets. Mumbai, Dubai, Singapore, Hong Kong,
Shanghai are all
developing new roles in the global economy. The Dubai
Investment bid for the OSX Scandinavian
exchange reveals a
similar set of strategic issues and challenges about the
way the new global capital markets are organized.
(viii)
FT hedge
funds and private equity a line to
Berlin. The German
government’s reaction to hedge funds and private equity
investment has changed substantially since the Merkel
government’s election and an election campaign which
raised the question of the role of hedge funds and
private equity in the most focused manner since the
Malaysian government’s reaction to the role of hedge
funds in the 1997 Asian financial crisis.
Political trends that affect
global capital market strategies and regulation:
(ix)
Estonia and
cyber-sabotage
.
(x)
China and
India compete for PetroKazakhstan.
(xi)
China as a
model for Iran
.
When one examines these eleven case studies,
rather like a geological relief-map, one can see the way
the world economy is being
reshaped.
(Case 1) The pattern of cross-border investments
and M&A is changing with thee emergence of sovereign
actors.
These will not behave in the same way as private
equity funds or traditional M&A operations. The
importance of government continues to grow, and the
difficulty of providing reciprocity (same standards in
both jurisdictions) changes the way in which
international capital markets behave. The
government of Kazakhstan can but
through sovereign equity a real estate project in
Canada.
Major changes in the financing of infrastructure
are made by (case 2) players with large supplies of
capital.
Auckland
Airport,
Dubai Ports activities
in its acquisition of P&O leaving it with an
ownership position in American ports are prototypical
case studies of this new global economy.
The Chinese attempt to invest more in the
profitable activities of private equity players like
Blackstone ( Case 3) show that for China, Dubai,
Kazakhstan, the Emirates are engaging in strategic
investment activities. The
diversification process of the Emirates from oil and gas
leads them into specific new markets like U.K.
retail.
Other previous examples of this diversification
come from quasi-state players like Kingdom
Holding
of Prince
Al-Waleed
, through which
his portfolio of publicly traded companies like
Citigroup and Apple is held. Kingdom is
not yet listed on the Riyadh stock
exchange.
Similarly, the Qatar government’s
acquisition of U.K. retailer
Sainsbury (case 4) represents a substantial change in
investment strategy for Gulf capital markets with
implications for the valuations of European retail
industry in particular.
The restructuring of global industries, like
nuclear energy (case 5) and petrochemicals (case 6)
involve substantial numbers of new players emerging from
areas where they were not previously market-forming
actors.
Investment banking and portfolio activities are
also transforming where there are key areas of activity
in the global economy, from the potential rivalries of
Seoul, Mumbai, Singapore, Shenzhen,
Tokyo, Hong Kong,
Shanghai to the
New York and London financial
markets (case 7).
The changing attitudes towards longterm private
equity players like Blackstone in Germany from
“locusts” like hedge funds to the agents of creative
destruction and regeneration of the German Economy (case
8) show how transformative the emergence of these new
players has been.
This all is taking place against a new backdrop
of global politics, where non-state actors or actors
with the passive backing of states can have severe
economic impact. The
example (case 9) of the sabotage of the Estonian economy
as the world’s first act of cyber sabotage makes a good
starting point for this analysis.
The battle between China and
India
for ownership of the Canadian-formed Kazakh oil company
Petro Kazakhstan
(case 10) shows the new patterns of competition in the
global economy.
The emerging China-Iran relationship as great
empires attempting to modernize (case 11) also show some
new patterns in the way that the world
political economy is evolving.
The skills required to be successful in global
finance in the future will require the understanding of
the new trends of wealth creation and investment banking
in the global economy. These cases will
focus on questions that are beyond this course or any
business degree to resolve in their entirety: (i) how does the
development of microgeographies, the development of
remittances , and the globalization of labour markets
affect currency flow and the conventional assumptions
about capital formation in emerging markets; (ii) how does the
current credit-crunch in U.S. capital markets affect the
relative power of hedge funds, sovereign equity funds
and private equity in the operation of the international
economy, on issues like privatization, cross-border
mergers and acquisitions and sectoral
consolidation? (iii) how does one
achieve a
non-corrupt and predictable global capital market where
innovation can be rewarded , entrepreneurs backed and
large amounts of capital are not wasted through the kind
of “oil curse” process of revenue transfers that have
characterized other economic patterns? (iv) What
happens to the quantitative modeling on which much
wealth management has been based when Chinese,
Singaporean and Gulf capital market strategies operate
according to criteria different from those which
programmed the assumptions of the modelers.
My view is that there are two new trends which
are going to shape the global capital markets in the
next decade:
the first is that the capacity to back
entrepreneurs through global investment structures will
change dramatically, leading to global venture capital
models and strategic alliances between wealth-creating
investors.
If this trend is encouraged by the expansion of
microcredits and entrepreneurial philanthropy, we will
see thousands of new wealth-created companies from
Senegal to Surinam with
capital structures very different from those we have
imagined in the commercialization of technologies like
Intel or Bausch in previous business-cycles.
For this to happen, the global capital markets
have to have the information required to predict future
sources of value and discover new entrepreneurs, but
also the discipline and the non-corruption necessary for
these companies to grow.
This may lead to entrepreneurial “spikes” in the
global economy, where certain regions of the world
become collaborative entrepreneurial science centres in
the way Silicon Valley
did in the past.
The Red
Herring Asia list shows many
of these new companies and a scale of potential wealth
creation with obvious ramifications for the global
economy.
The history of economic geography teaches us that
even with web communication; geographical regions become
hosts to entrepreneurial activities. People like to
socialize, exchange ideas informally, live in a secure
area, feel that they are functioning in a transparent
and aggressively ethical legal culture and so zones will
become magnets for activities: Helsinki-Tallinn
is one example, perhaps the development of a venture
capital friendly zone in
Tianjin
is another, the Dubai
Internet City remains another, and the
attempt to
build Singapore-Malaysia-Indonesia economic development
zones in the Riau islands
may be another.
.
These may or may not succeed depending on the
relationship they have with B-Schools, which remain the
driver of so much commercialization of knowledge and the
extent to which they develop a legal culture that makes
possible economic growth. But
this first trend is exciting. If
Riau and Dubai were
really competing to be the new Switzerland
of wealth-protection and discipline capital formation,
then there would be collateral benefits from all of us
from this competition.
The second trend is more complicated. In investment
banking, the ability to manage the borderlines between
economic and politics are precisely what determines
successful from unsuccessful activities.
Advocates of free trade have historically been
naive about the ways in which domestic economies favour
local actors:
the “non –political court systems of the United
States”, the capacity to disguise subsidies in defense
expenditures in many countries, including the United
States and France, a
blame-outsiders mentality which kicks in when there is a
crisis .
Consolidation of an international economy
requires multilateral processes (perhaps institutions,
but certainly processes) which ensure that there are
transparent global rules. This
requires a new economic thinking. Is
a
billion-dollar investment from Lukoil the same as
a billion-dollar investment from CNOOC or a billion
dollar investment from Goldman Sachs or a billion dollar
investment from a hedge fund in Connecticut? One
can talk about these questions as much as one
likes, but
the reality is two of the past five Secretaries of the
Treasury in the United States ran Goldman Sachs, and a
third head of Goldman Sachs became a powerful Senator
from New Jersey (and is now Governor of that
state).
The Minister of Finance in France, Christine
Lagarde, ran the Chicago activities of
the international law firm Baker McKenzie.
This is all to say that the challenge is
economics is the same as the challenge in international
war crimes trials:
to establish an international rule of law which
does not look like an imposition of rules designed by
former colonial powers and the United
States on other
countries in the world. On the
other hand, weak international frameworks which take the
lowest common denominator from the legal systems of
Denmark,
Australia and Equatorial
Guinea make no sense in
moral or economic terms. This
challenge lies at the heart of many of our concerns
about the stability of the international financial
system.
Some of us remain enormously concerned about the
economic empowerment of regimes like that of Equatorial
Guinea, which has the
competitive advantage of geographical geology. The
Iraq war and
the incompetence of the Bush Administration have served
to obscure many of the key trends which need management
if the global economy is to achieve stability.
Europe shows the potential in harmonizing the
economic systems of Slovenia,
Bulgaria and Finland, but
also shows the tremendous challenges in doing this
without ending up with lowest common denominator
decision-making disguised as good-faith multilateral
bargaining.
The framework within which decisions are taking
place makes the issues of this course even more urgent:
for financial decision-makers, we are constantly
assessing risks in various trends and how to position
ourselves (in portfolio management, in assessing
acquisition targets) in this topography of risk. The
political redesign of the global capital markets will be
led by those countries with a stake in transparency
because they are knowledge-rich, export-oriented
democracies.
A Prague-Helsinki-Ottawa-New Delhi-Singapore
collaboration could move beyond a council of democracies
to be a steering committee for global financial market
regulation. If
we fail to do this, the current trends will lead to a
protectionist backlash as suspicion of
CNOOC,
Temasek,
Dubai
investment activities
and the
export of Russian capital leads to , at minimum, the
establishment of different classes of capital in
economic activity, and at a maximum, the restriction of
foreign investment in generic terms, simply because that
seems to be the easiest and superficially most popular
policy initiative.
A global capital market where Dubai, Singapore,
China played by the same kinds of rules as Swiss and
Dutch banks in the earlier 20th Century is
potentially an exciting prospect, possibly ushering in a
long cycle or economic growth and the chance to
ameliorate global conditions by creating the
preconditions for economic growth in corners of the
planet.
Once again, a new generation of decision-makers
has to learn that there can be no economic growth
without efficient and disciplined global capital
markets.
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TURKMENISTAN GAS REVENUES
AND EAST AFRICAN BOTANICALS: SOME CURRENT TRENDS IN
VALUE-CREATION IN THE GLOBAL
ECONOMY
Lecture for McGill
International Business
Students
January 25th,
2007
Over the last few
years, I have had the pleasure of giving a number of
lectures in this programme. The
case studies have changed and there are shifts of
emphasis, but for my own purposes in terms of teaching
international business issues in the next era of
globalization, there are some themes which are
perennial.
So, here are some highlights from previous
years.
1.
The new world economy is driven by
entrepreneurial value creation. The development
of entrepreneurial finance in emerging markets remains
one of the great challenges of the early 21st
Century.
2.
Capital markets have to be disciplined and
ethical.
There is a correlation between success by the
indices of Transparency
International coincides directly with
economic prosperity.
3.
The “invention” of ethical and fair
capital markets in a new economy requires turning
remittances, microcredits, debt-cancellation new equity,
and foreign aid into investment capital. If
Equatorial
Guinea had a pension
fund that operated by Hungarian standards, we would not
be worried about the transfer of capital from oil
companies to the “state” of
Equatorial
Guinea.
4.
Globalization has produced a new set of
pressures on players within the global economy.
Dubai,
Singapore,
China,
India,
Malaysia,
Kazakhstan
are emerging as new sources of equity in global
deals. The harmonization and discipline of the global
capital markets will be directly correlated to the
growth and expansion of the new global economy.
5.
There are new sources of innovation in the
global marketplace: From Korean films to
Russian software, we have learned that innovation is
global in scope. The
globalization of innovation transforms the way we do
venture capital.
The assumptions that underlie the
global economy are different from the way the world was
approached five years ago. Muhammad Yunus wins the Nobel
Prize and the international development
agencies look much more toward promoting entrepreneurial
value-creation. When I was on
faculty at McGill, we had MBA research projects that
explored Global Competitiveness strategies in the
emerging economy of the early 1990s.
They looked at emerging themes and trends in the
global economy: e.g.
the rise of resource-financed states like
Uzbekistan and Azerbaijan in the post-USSR global
economy, the rise of Malaysia as a technology centre,
the unique role of state-backed financial actors in the
global economy, the role of the Canadian financial
community as a centre of global mining finance. These
issues seemed esoteric in 1993 but are central to the
thinking which makes up capital markets today.
The arguments for and against globalization in
the 1990s and early 2000s have proven to be limited in
their understanding of capital market activity. Both the
pro and anti globalization arguments seem dated in the
current political reality. It is refreshing
to revisit the globalization debate from the perspective
of 2007.
These themes are constant, so as we
start 2007, I wanted to talk about the way global energy
markets are transforming politics and capital market
structures and the way new alliances (e.g. China-Africa)
are transforming the phenomenon which we refer to as
globalization. I hope this
provides a framework for talking about international
business and finance for you and a basis of an ongoing
dialogue.
The new directions of the global economy are
characterized by four broad trends which are
under-reported in the North American financial
media:
(i)
the rise of new sources of innovative
capital in the global economy. The Mittal
phenomenon and Petronas shows new players whose impact
is significant;
(ii)
the rise of the Dubai-Singapore and
Singapore-Hong Kong capital markets access and the
development of new capital markets;
(iii)
the importance of global portfolios as
they affect both privatizations and economic growth
strategies in China,
India,
Malaysia,
Indonesia
(iv)
the role of energy revenues in global
capital markets.
To figure out the shape of the new
world economy, I would like to start with four case
studies:
1. Turkmenistan
and Central Asian pipelines.
2. Dubai and the
transformation of energy revenues into investment
capital.
3.
Remittances and the Haiti
economy: a failure to turn cash into productive
capital.
4. New sources of
innovation: commercializing Chinese science in
Africa: the
new global innovation map.
While western foreign policy-makers are
preoccupied with Iraq,
China
is making a Central Asian/African energy strategy. Significant decisions
about energy production and the transformation of energy
revenues into investment capital are being made in
Dubai and Astana.
Strategic decision-making at global corporations
and portfolio strategies at emerging market funds have
to calibrate the changes that are taking place in the
global economy.
THE NEW GLOBAL ECONOMY:
CASE STUDY #1
Turkmenistan gas and the growth that could come
from a move to democracy.
A quick look at a map of pipelines in
Turkmenistan
shows the pattern of wealth-creation in the region of
the world which supplies a substantial portion of global
energy. The
competition in this region is of extraordinary
importance. Is Turkmenistan
oriented toward Turkey
or Russia?
Is the Kazakhstan
foreign policy of balancing the west,
China
and Russia
viable? How do
pipeline routes affect geopolitics?
A quick look ay the
Baku-Tbilisi-Ceyhan (BTC)
pipeline shows why the struggle for political
influence in the Caucasian states of Georgia
and Azerbaijan
has been so critical. If a
Turkmenistan
now looking in different directions becomes oriented to
different kinds of policies, along the lines proposed by
the Turkmenistan Project. There are new political trends in
Turkmenistan which make it of interest given
its geopolitical significance.
I am using
Turkmenistan,
of course, as an interesting and topical case
study. The changes
transforming central Asia and the middle east
are collateral effects of the role of global energy
production in global capital markets, a relationship
always talked around, seldom adequately analyzed in
B-Schools (or anywhere else).
Energy markets are transforming the world from Nigeria to
Russia. The new
international political economy of energy has set a new
framework for global politics.
This lecture will look at how the new politics of
global energy can be managed, how it might be mismanaged
and where “globalization” of capital markets is in the
world post-Iraq. The emergence of
new sources of capital market activity and new sources
of investment (Dubai,
Moscow),
Venezuelan strategies for Latin American development,
Gulf strategies for investing in energy diversification
will be set up as case studies of the new international
environment we are currently charged with managing.
The strategies for managing
the “curse of oil” or the equal “curse of natural gas”,
the race for energy resources and the
accommodation of new capital market activities in the
next stage if globalization will all be
addressed in countries like Turkmenistan.
Will Turkmenistan
invest its resource wealth in economic development or
will it continue the pattern of its recent history?
The next generation of
international politics will be invented against this
template.
Key trend: the challenge of
building democratic states with efficient capital
markets in countries which are resource-endowed remains
the single most disruptive geopolitical issue. It
affects geopolitical strategy and capital market
management and remains a key issue of international
business strategy for the foreseeable future. The
development of oil trusts as capital market instruments
and the change in the corporate behaviour of
energy-producing companies like the Norwegian Oil for
Development Initiative remain some of the
most important issues in the structuring of the new
global capital market.
THE NEW GLOBAL ECONOMY:
Case Study #2
The rise of Dubai and the transformation of Gulf oil
revenues into investment capital:
Understanding the role of the Dubai oil
diversification strategy in global capital markets
requires an understanding of some of the relationships
realigning global politics.
The Dubai-Malaysia connection is represented in
the activities of Mohammed Alabbar and the development of
the Gulf Venture Capital
association . The emergence of
Dubai in an
extraordinarily short period of time as a
knowledge-centre, a media centre with innovations like
Dubai Internet City is
one of the most transformative cases on the planet. For
deal-financing, the transformed capital market structure
of Dubai to
Singapore
has implications for North American investment banking
and Canadian business strategies.
For students of international business,
understanding the implications of this for the way in
which global capital markets will operate is an
imperative.
Key trend: the
transformation of energy revenues into investment
capital significantly impacts the way deals are
structured in the global economy.
The rise of Dubai
as an investment centre, the increased role of capital
export from energy-producing counties remains a new
feature of global capital markets. This creates new
capital markets and strategic alliances between them
which will result in different structures for deals in
the next decade. The market for
acquisition capital in the PetroKazakhstan case is the shape of
things to come.
THE NEW GLOBAL ECONOMY: Case Study
#3
New patterns in the
commercialization of knowledge - innovation is global
East African Botanicals.
A great case study for the new
trends in global commercialization of innovation and the
political byproducts of China-Africa enhanced
relationships is the story of East African
Botanicals. Chinese herbal
medicine is a category of investment of considerable
interest in the venture capital community. The structuring
of a company which uses Chinese medicine and African
agricultural potential to create a company is the kind
of case study which illuminates significant new trends
in global business. With Novartis’
acquisition of East African Botanicals, the case becomes
even more a global story.
Key trend:
The global economy is now defined by the
globalization of innovation.
New companies are being designed around networks
which could not be envisaged five years ago.
These relationships are more a part of the
complex global infrastructure of knowledge which has
developed in the last couple of decades, between
research centres in India, China, collaborative research
teams in places as varied as Stanford, McGill, Helsinki
University of Technology and the kind of deal structure
demonstrated by the case of East African Botanicals.
THE NEW GLOBAL ECONOMY:
Case Study #4
Remittances and the financing of new
ventures in a global economy:
The nature of globalization of labour markets has
produced the phenomenon of remittances (transfer of
earnings from Somali-Canadians in Toronto to
Somalia)
as a major source of income in the transforming global
economy. For Haiti, this becomes the key
component of capital market creation.
Key trend: the complex social
networks which are part of the urban character of
London, Montreal
and Paris
are creating economic models which have considerable
potential for entrepreneurial activities if remittances
can be transformed into productive investment capital.
The mix of remittances,
microcredits, pensions paid from energy trusts to
citizens of countries like Equatorial
Guinea
and Turkmenistan
in a future will change the pattern of entrepreneurial
finance globally. The emphasis on
remittances by international development agencies
recently is to be welcomed as this provides a more
direct link between globalizing labour markets and
economic development. This can only work for
sustainable economic development if there are financial
capacities to transform remittances into savings and
savings into productive investment.
CONCLUSION:
REMOVING INEFFICIENCIES FROM GLOBAL CAPITAL
MARKETS
The implications of these trends are significant
for the new globalized capital markets. The creation of
productive investment for sustainable prosperity
requires that these be sources of investment capital is
converted into disciplined capital. The creation of
banking systems and financial regulatory systems becomes
a prerequisite to effective investment.
The most important thing for business students is
to understand that there are several sources of
disruption and opportunity in these new capital
markets. Dubai-Singapore,
Kazakhstan-China,
Russia-Turkmenistan relations have the potential to be
economically transformative. We are
witnessing new sources of deals in the global economy,
from the pattern of an Indian entrepreneur like Lakshmi Mittal to buy a
distressed asset in Kazakhstan
and leverage that into being the wealthiest corporate
executive in the United
Kingdom.
In a global economy, oil revenues are being
turned into new sources of capital. This creates
different structures in the global economy.
Saudi investment in Citicorp, the changing
pattern of managing the next generation of oil
resources, the acquiring ambitions of
Malaysia,
Chinese, Indian, Dubai and
possibly Kazakh investors are all going to change the
dynamic of global investment banking and fund
management. I have proposed a Gulf of Guinea investment fund
modeled on the Quebec CDP and Senator Hilary Clinton has proposed with
Senator John Ensign a variation on the theme in terms of
the management of Iraqi oil assets.
These are themes which are going to dominate
global business strategies and investment strategies for
the next decade.
For students looking at the mixture of
opportunities and trends in today’s global economy, we
are seeing new pockets of potential growth.
A slightly more democratic Turkmenistan
would not just an opportunity for democratic
nation-building but would be an investment
opportunity. The new energy
markets are driving capital market structures globally,
creating new significant players like Lukoil and
Dubai Ports,
but also creating new kinds of strategies for Chinese
and Indian entrepreneurs. One of the most
exciting business models I have seen recently is the
proposal to turn remittances into entrepreneurial
finance. The combination of
remittances and microcredits can transform the economic
infrastructure of many countries in the world and create
the kind of growth at the base of the pyramid that the
deservedly influential business professor P.K. Prahalad has
analyzed before. For business
strategists, understanding the new sources of growth and
value-creation in a global economy is critical. From
Mittal Steel to East African Botanicals, we are seeing
very different business models. Now, I
would argue in a business strategy course that this is
merely the globalization of a longstanding trend in
creative business genius: the transformation of a rubber
boots manufacturer into a communications giant and the
only non-U.S. company in the top-10 brands in the world
(Nokia). The difference is now
that global networks are driving this phenomenon.
There has been an extraordinary movement along a
learning curve in the last five years. The
movement of microcredits from marginal to Nobel Prize
winning is a highly visible change.
Less visible is the extent to which a consensus
has been reached about the end to poverty, focusing on
building civic institutions that can sustain efficient
capital markets and a democratic rule of law.
It is a different global economy today with Asia
Rising, CNOOC and Dubai Ports being part of
the decision-making of a new global economy.
It will be even
more different if we learn how to transform new sources
of capital into the kind of entrepreneurial finance
require to produced sustainable prosperity and end
poverty on this planet.
Back to
Top
NORWEGIAN ENERGY STRATEGIES AND
SUSTAINABLE GLOBAL PROSPERITY
Updated notes on Oil and Capital
Markets
June 11,
2006
The Norwegian government is trying to develop a
sustainable investment strategy for expected oil
revenues off-shore from Madagascar.
Norsk
Hydro has developed
a case study of diversified energy investing. The
investment in Business
Schools in Kazakhstan is an attempt to create a high
priority for developing the international capital market
skills of those managing the next generation of
petro-capital.
The link between environmental strategies, global
sustainable prosperity and the management of
international capital markets has never been more
apparent and urgent. A recent exchange in
the Financial Times drew attention to this issue once
more in the context of Madagascar
and Norwegian initiatives. An excellent letter
written by Diarmid O’Sullivan and Gavin Hayman of Global
Witness describes the Norwegian initiative as “a bona
fide attempt to make the extraction of oil and gas more
transparent and accountable to the citizens of producer
countries”.
The next stage of economic development and the
management of transparent globalization in the aim of
sustainable prosperity require a
serious attempt to invent new financial instruments for
the management of revenues from oil and gas
production. The
“Dutch
curse” or the
longstanding impact of petrodollars on corruption is
well-understood by decision-makers in public policy
areas and by boards of major energy providers. The
challenge is
for public policy-makers to
invent a new revenue
system for the development of efficient capital markets
in the newly-onstream oil producer countries. A
democratic post-OPEC building on models proposed before
for an EBRD-style African fund capitalized by resource
revenues and targeted at entrepreneurial development and
the provision of pension-plan style distributive income
policy instruments is needed more than ever.
In the last few months a Gulf Venture
Capital Association has development with Malaysian
participation. The African Bank
for Reconstruction and Development can include
Malaysia
, Kazak, Turkish, Indian and
Indonesia
participation. The project for
the next decade is to build by Transparency
International standards the investment banking
skills required to ensure that this round of oil
development (in Central Asia, the Gulf of Guinea and
Indian Ocean) does not produce the complexities with
which the global community is dealing today and to
ensure that the benefits of commercializing natural
resources creates the means for sustainable prosperity
in Angola, Madagascar, Kazakhstan and
Equatorial Guinea. This
is a foreign policy priority in which
Canada
as a global resource economy with
the opportunity to become an energy superpower has a
chance to take a leadership role. Energy
strategists and oil company boards would welcome a
formula for ensuring that the resource rents in
Gulf of
Guinea
were reinvested in sustainable prosperity
initiatives. Right now, there
is no political leadership for developing that
formula.
In this G8, there is an opportunity to establish
this as a Canadian strategy for Africa and Central Asia . Complex as
this is in the current foreign policy mix where Chinese
energy realpolitik has to be integrated into this mix
(which is still another argument for China
, India
, South
Africa ,
Malaysia
, Brazil
and Indonesia
becoming the G-14); there are
incremental steps that can be taken:
(i)
A Democratic OPEC where young Kazaks
and young Nigerians could examine the future of the
global economy in terms of investment strategies.
Those adhering to the Transparency
Initiative set out by the
U.K.
government would be
members;
(ii)
An African version of EBRD (ABRD)
where capital was
formed to provide an African investment bank,
where African MBAs and B-Schools could invest in
African entrepreneurs;
(iii)
A separate pool of capital
administered as a venture fund by the oil majors to
reinvest in diversified economic growth and efficient
capital market structures in oil-producing
economies.
Without these frameworks in place, the
preconditions for sustainable prosperity will not be
created and we will have another cycle of kleptocracy
and market distortions resulting from the way
petrocapital is used. It is this
intersection between international political economy,
global capital markets, international development and
geopolitical security issues which requires a new
approach to political science and the work being done in
global B-Schools. I
hope that Canadian universities take the lead on this in
the next year as part of the attempt by this next
generation of Canadians to make Canada
’s position as a global
energy superpower a launch pad for the next generation
of thinking about how Canadians positively influence
global society.
Chip Cummins work in the Wall Street
Journal especially his April 10th, 2006
piece
As Oil Supplies Are Stretched, Rebels, Terrorists Get
New Clout follow the connections between oil and global
politics with particular astuteness.
Back to Top
PETROCAPITAL, GLOBALIZATION AND
MANAGING THE IMPACT OF OIL PRICES ON CAPITAL
MARKETS
Jim de
Wilde
Notes for Remarks at Haskayne
Business
School ,
University of
Calgary
March 17, 2006
When Dubai Ports World acquired P & O, there
was certain symmetry to the deal, the end of one of the
most famous, almost romantic symbols of European
colonialism and 19th
Century globalization. The next round of
globalization started with Dubai Ports World divestiture
of its U.S.
assets in March 2006. It involves
recognizing many of the weak foundations of the
1991-200x post Cold War globalization.
All capital is not the same; its source matters,
both in terms of country of origin and in terms of
whether or not it is formed from petro-revenues.
The mainstream theory
of globalization in the 1991-200x period argued that all
capital is the same. It is disciplined by the
efficiencies of investment behaviour, opening up markets
to greater productivity. The simplistic
anti-globalization argument in the same period was that
local capital should not be swamped by large foreign
investment whatever its source.
At one level this was the no Wal-Mart argument.
At a more
sophisticated level, it was always about maintaining the
control of smaller capital markets to control the pace
of growth (as well as local interests). This was the
Malaysian argument at the time of the 1997 Asian
financial crisis. Now we are
in a different era, one defined by South-South investing
and new players in the global economy. This raises a
new suite of questions.
What difference does
it make if the capital is formed not by productive
activity, e.g. the commercialization of processed grains
and building a multinational like Kellogg’s, the
refining of petroleum and building Shell? What if it is
just non-productive capital resulting from resource
rents and geological roulette?
How does the concentration of newly-formed
capital in the hands of a few oil producers affect the
open operations of international finance and the
decision-making of global capital markets? How
does petro-capital behave differently than other forms
of wealth management? Oil’s disruptive
effectives on global capital markets have been
well-documented from Daniel Yergin to Peter
Tertzakian. With Dubai
Ports World, it has become centre-stage in the
international political world.
Fluctuating oil prices can be managed by
sophisticated hedging strategies in portfolio strategies
for institutional investors.
However, in a
world defined by private equity activities, steadily
rising oil prices have a different impact on capital
accumulation in the global market and on liquidity for
global acquisitions. President
Bush’s State of the Union address, the “addicted to oil”
speech avoided the central paradox of the new global
economy: rising oil prices are required to accelerate
the shift to new fuel sources and rising
oil prices create strong new dominating players in the
global economy while new entrants like China and India
are being fully integrated into the global trading
system. The
management of geologically-generated capital becomes
central to the new political system that is emerging,
not in some sinister conspiratorial model of the left
where the oil companies are hazardous to economic
health, but also not in the way of traditional liberal
economists who view the source of capital as irrelevant
in their politically naive approach to understanding
economic activity.
Canadians in general and Albertans in particular
could play a leadership role to play in the definition
of this new global economy. It is a world
where energy investing will play an increasingly
significant role. As a result, it is a
world where the long term success of the global capital
markets will depend increasingly on how we ensure that
petro-revenues are converted into sources of productive
investment. That is the ingredient
which has been missing from the global economy the last
few decades, in no small part because we just hoped they
would be reinvested in London ,
Zurich ,
Paris or Wall
Street. The changing world
order with the rise of non G8 investors has brought that
paradigm to an end.
The new global
capital markets are characterized by the reality that
oil has become even more of a political instrument than
it was during the 1970s OPEC embargo. The conversion
of petro-wealth into political leverage by the regimes
in Riyadh ,
Tehran ,
Moscow and
Caracas means
that global capital markets have entered a new phase and
that this phase coincides with security challenges.
For international strategic considerations, two
innovations are paramount:
(i)
The more petro-revenues that can be
converted into longterm development capital, the more
secure the international capital markets will be;
(ii)
International practices
need to differentiate between capital that is formed as
a result of geological roulette and managed by a
state-run organization with little governance as to its
rules of investment. Surely
companies that cannot meet regulatory standards should
not have the same freedom to invest as companies which
comply with Danish or Delaware
laws of corporate governance.
Calgary is at
the centre of Canadian foreign policy in part because
Canada
is now an energy superpower and
energy has become the driving force of global security
and global capital market issues.
The vocabulary to describe this is just taking
shape now.
The Dubai Ports crisis was the first major clash
of petrocurrencies and the global capital markets. The consensus
about globalization has been based on the notion that
capital is capital and that a Danish company should be
able to buy an Bangladeshi asset or a Montana company a
Saskatchewan company and that this was indisputably a
good thing in a world of opening trade. This
approach to trade was always naïve and utopian.
Many people pointed out this in real time. The debate about
trade harmonization and “fair trade” was understandably
discredited by some of its more extreme advocates. But the question
about how compatible products are made in Central
American textile factories with no union rights and
unionized North American plants ha not been
satisfactorily addressed in the public policy process.
Canadians
argued about the impact of U.S.
investment on cultural industries.
Americans would
not contemplate a foreign investor buying media assets
as Rupert Murdoch’s case
demonstrates.
The simply
reality was that unregulated global capital was always
an abstraction. Now global securities
regulators monitor money laundering.
Corporate governance should require the
compliance of all companies wishing to participate in
the global economy, including Lenovo and Dubai Ports
. Abstract
concerns like compliance with international laws ranging
from the Endangered Species agreement to labour
practices have demonstrable importance in a regulated
globalization. The new real issue is whether
we can address the issues of from what source capital is
formed and whether state-owned companies
should be treated differently as they become global
players. By definition,
the strategies of a state-owned company are informed by
different criteria than publicly-traded companies. Even more
significantly, the availability of acquisition capital
to a state-owned firm is different from those who have
to raise capital in public markets. To ignore this
difference is to put globalization at risk. Our conventional
framework towards globalization of finance has put these
questions on the back burner, focusing instead on how to
achieve portfolio performance and how to use foreign
investment to enhance productivity in other
countries. It should be no
surprise that the anti-globalization movement has gained
momentum in recent years.
Dubai Ports has ensured that we address the
question of how we view petrodollar-formed acquisition
capital. We have
not addressed the question of state-formed capital in
Chinese companies entering the free and regulated
market. We have not addressed
the question of private investors like Prince al-Waleed Bin
Talal of Saudi
Arabia using capital to
invest strategically in western companies. Is this just
another high net worth individual or is the capital
different in terms of its source of formation?
Dubai Ports as a case has made this issues a
central part of the new international
debate.
Similarly, the economic power of Moscow ,
Caracas and
Tehran which
know how international capital markets operate has
created a strategic problem for advocates of liberalized
trade and globalization? What if Chavez
wanted to buy Disney? Or Putin wanted
state-backed actors to achieve a majority position on a
small Tbilisi or
Talinn stock exchange. The nature of
oil-formed capital in global markets has dramatically
transformed “security” threats.
What is to be done? In the
short-term, we need to address the source-of-capital
issue in more direct terms. The issue needs
to be focused on state-backed firms which distort the
market for acquisition capital.
Realistically,
this will take a very long time and the result is we
will see many more Dubai Ports
(or fewer if the petro-capitalists become
more inward looking or diverted from the global economy
and Chinese state-backed players simply build towns in
Angola
and Nigeria
to be close to the source of their
energy). It is inevitable
that there will be eruptions of anti-globalization while
the new rules are being sorted out. However, in the
long-run we are building the framework for a global
economy and a global capital market in which disciplined
and strategic capital will create the conditions for
sustainable prosperity in Angola and Kazakhstan as well
as Alberta and Denmark.
In the longer-term, as petro-capital becomes more
a feature of the global economy, Canadians can advocate
three things:
1.
An alliance of energy-producing
democracies, notably Canada
and Norway
to be able to ensure with the major
energy-producing companies that energy production.
There should not be seen as an anti-OPEC, but as
a network of democratic oil producers who work with
multinational oil companies and oil technology companies
(pipelines, infrastructure) to ensure that the
disruptions in the global economy in the decade-long
move to new sources of energy are kept to a
minimum. It becomes a
Democratic Oil version of the G-8, probably talking a
lot more than it does things, but important if only
because it focuses the agenda.
2.
An acceleration of the energy
diversification agenda. New York Times
columnist Tom Friedman has superbly polemicized on this
issue. He doesn’t go far
enough and this is also where Canadians can take the
initiative with credibility. It is in
our economic interests because we have the knowledge
about all aspects of clean energy, grid management, and
fossil fuel production. In designing the hub
for Alberta resources, networks established with GE,
Shell, Chevron Texaco, Norsk Hydro are critical to the
diversification strategy. In another
talk, I am looking at best practices in alternative
energy investing (Chevron Texaco, Norsk Hydro, Nth
Power). These relationships
and relationships with energy investors like those which
exist in the rest of Canada
are a critical first step toward
ensuring long-term energy stability and removing the
Bush Paradox from the global security agenda.
3.
Finally, and most importantly, this
integrated global economy needs to ensure that
the revenues that come from the next round of petroleum
revenues is invested in longterm economic
development. By next
round, I mean not only the revenues that come as oil
moves from $70/barrel to $XX/barrel, but the impact of
new players: Angola, Equatorial Guinea, Nigeria,
Kazakhstan,Sudan on the global economy.
The commitment that all
new petro-wealth be put in the hands of accountable and
regulated capital actors. In short, we need
Angolan pension-funds investing in Angolan personal
security, not the simple transfer of wealth based on the
anachronistic state-to-state transfers who have made
countries without policy infrastructures the new
superpowers ( Russia
, Iran
, and Venezuela
). The
axis of oil may be a fact of contemporary life, but the
geological heritage of West Africa and central
Asia must not
become an even further distortion of international
investment patterns. The promotion of
a Gulf of
Guinea
Trust , analogous to the
Heritage Fund, the CDP in Quebec or
the Norway Trust is one of the most important political
issues on the global agenda, not simply for the benefit
of African economic development, but for the imperatives
of global security. The international
system cannot be expected to manage additional sources
of disruption. This could become a cornerstone of the
new Canadian foreign policy, which will also be, of
necessity and because of knowledge-base more
Calgary-oriented than our foreign policy has been
before.
Back to
Top
Finland as a growing
investment
July 4, 2005
:
Why Finland
? A country
which ranks first in the Transparency
International list of corruption-free countries
and also first on the IMD list of competitiveness
(no coincidence to be number one on both) is an
obvious place for investment. The same
time-zone potential relationship with
Israel
in terms of complementary
technologies and compatible business cultures also
suggests on of the more interesting possible
economic developments of the early 21st
century.
The issues confronting Finland
now are not just venture capital,
but are about consolidating its diverse culture of
start-ups into viable global companies and
brand. The
technological resource richness of Finland
is extraordinary and fits into
categories like smart logistics, remote metering
for energy control, sensing technologies for
pollution control and biomedical
devices.
Finnish strengths go beyond Nokia and the
brand management of Nokia and go to areas like
www.helsinkivirtualvillage.fi
where consumption patterns for broadband and
wireless technologies can lead to new strategies
for product development that meet the practical
needs of consumers.
There are excellent venture capital firms,
like www.eqvitec.com, www.nexitventures.com
and www.sfk.fi (now part of the
3i www.3i.com) group. A
number of companies have developed capacities
which fit into an expanding global product-mix for
new technologies in wireless. Some (her cited
to introduce people unfamiliar with Finland to the
kind of cutting-edge business models being
developed and financed are a few worth
following:
www.hantro.com
(wireless video) www.ekahau.com
(logistics and positioning) www.avstechnologies.com
(video streaming)
www.digia.com
(enabling technologies) www.ekahau.com (logistics) www.smartner.com (logistics) www.springtoys.com
(wireless entertainment) www.mediaclick.fi (wireless
entertainment)
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