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The Tiger and the Dragon: Prospects for the new development frontiers


March 1, 2005
By Pulp & Paper Canada

Considering the various checks and balances, Cetron anticipates that the tiger of India may well pull ahead over a 25-year horizon as the preferred long-term investment partner, notwithstanding that C…

Considering the various checks and balances, Cetron anticipates that the tiger of India may well pull ahead over a 25-year horizon as the preferred long-term investment partner, notwithstanding that China is considered to be ahead at this point in time.

The enormous potential of Asia has excited many in the business community and there seem to be two major epicentres for opportunity in China and India. Both regions have made tremendous strides over the past 25 years with growth rates that have lifted their respective economies toward world-leading influence. China has used its huge population resource to become the fourth-largest industrial producer behind the U.S., Japan and Germany, and is leading, along with India, a global cost reduction trend. Growth rates of 20% per year in exported goods are forecast for China. While the average national income of about $900 for the average Chinese is twice that of India, there remains a large differential between the cities and rural China, where the standard of living is significantly lower. China is ahead in terms of per capita GDP, with only 10% of the population living below the poverty line. From an investment viewpoint, China is ahead at this point in time because it has solved many of the development problems that India has yet to resolve. Perhaps this is a consequence of the different political systems. China is also ahead in literacy and its infant mortality rate is lower; communism has largely dismantled social inequality compared to the remains of the caste system in India. China also had a head-start on conversion to capitalism through Deng Xiaoping’s initiative in 1978 compared with the 1991 beginning of escape from Nehru’s anti-capitalist socialism.

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However, there are underlying forces that could accelerate India’s economic influence and stability. India has a tradition of democracy that is 2000 years old, while China still employs absolute autocratic rule. Corruption is being cleaned up in India; that aspect of China’s situation remains hidden. India has an open attitude to global affairs; China still censors the Internet and attempts to crush Fulan Gong practitioners. India’s educated speak English as a native language; they turn out more English-speaking scientists, engineers and technicians than all other nations combined. This will be important in a world increasingly dominated by English as the global language of business. India has the advantage in “national stability,” which is measured by the complex interaction of many factors (e.g. demographic trends, health care, religion, socio-cultural trends). A critical looming time bomb for China will be the consequences of their one-child policy. The gender imbalances and age demographic biases pose huge and as yet, unsolved problems.

Why is this important?

Making good choices for investment strategy and business partnerships in India and China clearly requires a balanced analysis and a long-view perspective. Prudent analysis of key critical primary drivers is essential, but it will also be important to recognize subtle secondary drivers that will require identification, measurement and analysis. This is about incorporating a foresight intelligence system, where a discipline of focused scanning, signal analysis and executive decision-making will be the measure of success. Driving factors will be multidimensional in scope; some may not be obvious. Some examples might be: currency alignment, demographic trends, openness, number of ISPs, R&D spending, religious attitudes, emigration trends, infrastructure spending, income gap, military officers’ pay, intellectual property rights — many of you may have your own list. The choice for driving factors will depend on the strategic critical business issues under consideration.

Alan R. Procter is an international consultant helping organizations find new competitive capability. He can be reached through www.alanprocter.com


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