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“ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?”. By Ravi K Mehrotra Chairman Foresight Group, London . At 7 th IAPH Asia Oceania Regional Meeting & Forum Karachi Sheraton Hotel, Pakistan On 15 th February 2006 . When I visited China in late 1980’s.

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Shipping potential due to growth in regional block of south asia l.jpg

“ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?”

By Ravi K Mehrotra

Chairman

Foresight Group, London

At 7th IAPH Asia Oceania Regional Meeting & Forum

Karachi Sheraton Hotel, Pakistan

On 15th February 2006







Pakistan today l.jpg
Pakistan today SOUTH ASIA?”


What do the previous six images tell us l.jpg

Pakistan & India in 1980 SOUTH ASIA?”

Ahead of China esp. in free enterprise and per capita earnings

China in 1980

Still struggling with Communist Egalitarian past and lack of enterprise

How did China imbibe Entrepreneurship into their Management?

How will India & Pakistan’s Industrial Growth look in 2010?

WHAT DO THE PREVIOUS SIX IMAGES TELL US?

Pakistan & India in 2005

  • Full of vigour but political system still trapped in clanship management of the Nation instead of taking charge of enterprise

China in 2005

  • Government took charge of enterprise in late 1980’s, transforming China into a modern industrial nation which increased per capita income by a factor of 5


What can we learn from china s phenomenal growth over last 25 years l.jpg
WHAT CAN WE LEARN FROM CHINA’S PHENOMENAL GROWTH OVER LAST 25 YEARS?

  • Population is not a liability for a nation but an opportunity

  • Why an opportunity? If inflation can be kept very low then this population can produce goods for daily use at a very competitive cost

  • The advantage of producing daily consumable goods at very low prices is you can easily export without being branded as dumping goods

  • In fact these low cost consumable goods are welcomed by developed Nations with open arms

  • Why are these low cost goods welcomed? Because they keep the developed world’s inflation down. Producing these goods perennial problem for developed world to control inflation

  • It is because of China the developed world has lived for the last 10 years with very low inflation (below 2.5%)

  • Their capital and labour has been used to produce goods of high value addition. This is the reason of healthy growth of world’s economy in last 10 years and low interest rates


Are pakiston india the next big story l.jpg
ARE PAKISTON & INDIA THE NEXT BIG STORY? 25 YEARS?

Are Pakistan & India ready for a repeat of the China Effect on Global Shipping?

Pakistan & India’s Intellectual Industry Growing, Why?

Pakistan & India presently lacks development of infrastructure and full utilisation of labour force. More than 25% population unemployed or partly-employed

Because of our ancient philosophy and emphasis on self-analysis we have become very argumentative. Each of us wants to keep our point of view ahead of others. This makes it difficult to bring out cohesive policies for growth of the Nation. Due to this, we take too long to finalise a project (hence slow growth).

Due to this argumentative nature our political systems have developed over the last 58 years laws-within-laws which have become impediment to free our labour force for productive growth

Are we ready to unshackle this? This is the main reason of keeping 32% of Pakistan and 23% of India’s population below the poverty line


World market shares for manufactured exports l.jpg

= 25 YEARS?

=

Source : World Bank and IFC: India – Investment Climate and Manufacturing Industry, November 2004

WORLD MARKET SHARES FOR MANUFACTURED EXPORTS


Gdp growth 2000 to 2050 l.jpg

[2003 bn US Dollars] 25 YEARS?

45000

40000

35000

30000

- Similar per capita GDP as India

25000

20000

Japan

15000

Russia

Brazil

10000

Germany

5000

0

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

GDP GROWTH 2000 to 2050

Source: Goldmann Sachs: The Path to 2050


Weaknesses of pakistan indian economy l.jpg
WEAKNESSES OF PAKISTAN & INDIAN ECONOMY 25 YEARS?

  • Still dependent on agriculture – 25% of GDP and 40% of labour employment

  • Labour Laws archaic – contributes to keeping people below poverty line

  • Political system controlled by clan mentality

  • Day-to-day economic activity shackled in bureaucracy

  • Legal system slow & time consuming

  • Acute shortage of infrastructure development in the country


Urbanisation trends l.jpg

13,1% 25 YEARS?

86,9%

12,5%

87,5%

1950

1950

14,3%

85,7%

1955

14,2%

85,8%

1955

15,6%

84,4%

1960

16,0%

84,0%

1960

17,0%

83,0%

17,6%

82,4%

1965

1965

18,4%

81,6%

1970

17,4%

82,6%

1970

19,8%

80,2%

1975

17,4%

82,6%

1975

21,1%

78,9%

19,6%

80,4%

1980

1980

22,6%

77,4%

23,0%

77,0%

1985

1985

24,1%

75,9%

1990

27,4%

72,6%

1990

25,6%

74,4%

31,4%

68,6%

1995

1995

27,0%

73,0%

35,8%

64,2%

2000

2000

28,2%

71,8%

2010

45,1%

54,9%

2010

29,1%

70,9%

2015

49,5%

50,5%

2015

29,7%

70,3%

53,6%

46,4%

2020

2020

30,1%

69,9%

2025

57,2%

42,8%

2025

30,0%

70,0%

Urban population

2030

60,5%

39,5%

29,5%

70,5%

2030

Rural population

URBANISATION TRENDS

World Population Prospects: The 2004 Revision United Nations

Population Database Population Division


Value of merchandise exports imports l.jpg

[mn US-Dollars] 25 YEARS?

2003

Exports: 55.9 bn USD

Imports: 70.7 bn USD

2003

Exports: 437.9 bn USD

Imports: 413.1 bn USD

Exports

Imports

VALUE OF MERCHANDISE EXPORTS & IMPORTS


Fdi inflows per year l.jpg

[bn of current US Dollars] 25 YEARS?

53.5

4.3

2.5

FDI INFLOWS PER YEAR


Strengths of pakistan indian economy l.jpg
STRENGTHS OF PAKISTAN & INDIAN ECONOMY 25 YEARS?

  • Self-sustaining & not implanted by foreign investments to utilise cheap labour

  • Industrial Growth improved from 5% to 11.7%

  • Largest middle-class purchasing power

  • Largest number of Professionals

  • Largest percentage of computer literate people

  • Self-sufficient in food production in fact net exporter


China vs region fdi attractiveness l.jpg

78% 25 YEARS?

22%

Highly Educated Workforce

73%

27%

Rule of Law

73%

27%

Management Talent

70%

30%

Transparency

66%

34%

Cultural Barriers

57%

43%

Regulatory Environment

50%

50%

Availability of M&A Targets

46%

54%

Consumer Sophistication

45%

55%

Competitor Presence

42%

58%

Tax Regime

41%

59%

Quality of Life

41%

59%

Political/Social Stability

40%

60%

Economic Reform

39%

61%

Financial/Economic Stability

36%

64%

Infrastructure

35%

65%

Production/Labor Costs

34%

66%

Government Incentives

Region

29%

71%

Access to Export Markets

22%

78%

Market Growth Potential

China

6%

94%

Market Size

CHINA VS REGION – FDI ATTRACTIVENESS

Source: FDI Confidence Index. A.T. Kearney. October 2004. Volume 7


Infrastructure investments l.jpg

[% of GDP] 25 YEARS?

*) Transportation, Electricity, Telecom etc.

INFRASTRUCTURE *) INVESTMENTS

Source: China Statistical Yearbook, RBI, Morgan Stanley Research


Summary on pakistan india l.jpg
SUMMARY ON PAKISTAN & INDIA 25 YEARS?

  • It will still take time to sort out distortions in society and its economy

  • Acute shortage of infrastructure development in the country

  • Above two weaknesses will limit economic growth

  • For next 5 years Pakistan & India will have a negative trade balance

  • Population growth means young labour force for next 20 years

  • Hydrocarbon exploration in river deltas due perennial rivers from Himalayas will contribute to both countries being self-sufficient in energy

  • Due globalisation of Pakistan & Indian economy Bombay and Karachi Stock Exchange will continue in positive direction


Conclusion l.jpg
CONCLUSION 25 YEARS?

Pakistan & India will sustain 8% Growth Rate during next 5 years

Economy will grow to between 10 – 12% between 2010 – 2015

Will Pakistan & India’s Development have an effect on Global Shipping?

Will International Ship Owners reap similar profits which they had from China over the last two years?

I speak annually at Cambridge University and always end with a question to my audience, so my final question to you is:

Are we ready for a repeat of the China Effect for Global Shipping?


Slide22 l.jpg

“ SHIPPING POTENTIAL DUE TO GROWTH IN REGIONAL BLOCK OF SOUTH ASIA?”

By Ravi K Mehrotra

Chairman

Foresight Group, London

At 7th IAPH Asia Oceania Regional Meeting & Forum

Karachi Sheraton Hotel, Pakistan

On 15th February 2006


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