Archive for December, 2009

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impending chinese century?

Thursday 31 December, 2009

The Chicago Council on Global Affairs hosted this event THE CHINESE CENTURY? A NEW AGE IN U.S. – CHINA ENGAGEMENT Here’s what they have to say:

Niall Booker of HSBC said there may be a financial bubble in China because there are some toxic assets there, but the authorities are aware of the risks.  There is some indiscriminate credit, but the government controls the flow of credit & they’ve seen it before, but there is still the potential for asset bubbles.  There is not yet a flight of manufacturing back to the US because cheap Chinese goods have subdued inflation here & manufacturing flight to China benefited service industries here.  There could be shortages of skilled workers.

Cheng Li of Brookings China Center admitted wireless could be a solution for healthcare in China.  How much Chinese can contribute to the world economy depends on the government’s plan.

Evan Osnos, formerly of the Chicago Tribune & now of The New Yorker, piped in on healthcare, saying ther have been cases of violence against doctors exhibiting the gap in care for the rich & poor.  It’s politically volatile as babies are 7X as likely to die in the provinces compared to Beijing.  Bad pollution ratings are 100;  forest fires are 300; Beijing rates 500.  He also described a media personality (Pu So Li?) who started a publication (Tai Jing?) which became too provocative & profitable & was ultimately shut down.

On Brazil, Booker indicated devaluation is not the way to go.  Consumption in China, Japan, & Germany combined is still only $6.5B while in the US it’s $10B.

Li said Obama has changed bilateral & trade relations profoundly.  He wants dialogue & no longer points fingers.  Cooperation is not a choice, rather a necessity.  Osnos chimed in that the Chinese did not expect Obama to get elected because he had so little experience, although he did win the American Chamber of Commerce election by a greater margin than in the US.  Bush asked China to be” a responsible stakeholder,” while Obama is more productive conducting talks behind closed doors.

In wrapping up, Booker noted in 1820 China comprised 1/3 of the world’s GDP, so their sway is not new to them, but they do have a huge infrastructure to build, so we shouldn’t demonize them.  Li reiterated there are 6 major divisions in China, including intellectual, geographical, & social.  China is not monolithic, so we need to keep their domestic situation in mind when dealing with them.  Osnos countered that they are promoting clean energy & has increased it energy research 50X.

Q&A

  • re:  modernizing the military,Li said there are transparency issues & China is still critical of military sales to Taiwan.
  • Osnos said investments in the law are resulting in the poor being able to access the courts to fight pollution issues.  The problem remains that successful lawyers are sometimes disbarred.  Li contributed that we have too many lawyers here in the US while in China they had too many engineers, but are now producing 100K lawyers/year.  The rising generation has law degrees rather than engineering degrees.
  • Osnos maintained that innovative new ideas still come from the US & offered evidence that while the # of research articles has increased from China, they are rarely cited.  Osnos informed us that China is working diligently to secure oil & water supplies, & is seeking alternative energies.  Li popped in that there are many books on innovation in Chinese bookstores.  Their need for water is increasing 30X because of industrialization.  Booker encouraged Americans to invest more in education to maintain our edge.  Although China holds 10+% of US debt, they never take more than 20% of any single issue.  China is leading an evolving model of centralized direction in the world.
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bosnia-herzegovina’s ascension to the eu

Monday 21 December, 2009

I attended this event BOSNIA AND HERZEGOVINA: ON THE PATH TO EUROPEAN UNION featuring Eldin Kajevic, Consul General of Bosnia and Herzegovina (BH) in Chicago & hosted by the Niagara Foundation.  BH has a population of 4.4M & is 1/3 the size of IL.  BH is part of the Adriatic Charter of NATO & is a UN Security Council member.  They are drafting a new constitution which will replace the peace agreement of 1994.  Since starting this process, reform has stopped.  There are 3 obstacles which stand in the way of BH ascending to the European Union:\

  1. the Dayton Peace Accords-these stopped the bloodshed, but did not leave a viable administrative solution.  BH has 3 presidents, 1 for each ethnicity, Bosnian, Croat, & Serb.  Despite this, the representative to the EU is the most important position in the country.  The government consumes 50% of the country’s GDP.
  2. BH’s ethnic composition-has changed & solidified since 1991.  There are now clearer majorities in many regions, which have accentuated the walls as ethnic dividers.  1/3 of ethnic intermarriages are not recognized.  There are still quotas for jobs by ethnicity.
  3. EU’s inconsistent approach-originally the EU set down stipulations for ascension, but now identifies the problems & directs locals to solve them themselves.  This has led to legislative stalemates & administrative catharsis.

BH has a common goal:  economic progress with a growth rate of 5.5%.  The currency is pegged to the Euro & bonds are rated B+ by S&P & B2 by Moody’s.  BH is a part of the Central European Free Trade Agreement.  In Sarajevo, you can find a church, mosque, & synagogue within 4 blocks of 1 another.  They are breaking down walls.

Q&A

  • The Dayton Peace Accords worked until 2006 when BH started work on a new constitution, but has been a problem since then.
  • Displaced refugees have gone all over the world, to North America, Western Europe, & other countries in Southeastern Europe.
  • Other nearby countries have offered automatic citizenship in their countries to ethnic Serbs & Croats, which creates a problem in BH because those other countries have better functioning constitutions than in BH.
  • Technically, the EU has listed specific criteria to ascend to the EU, but the reality is the current deadlock has not allowed BH to realistically address them.
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global midwest clean tech conference

Saturday 19 December, 2009

I attended the Global Midwest Clean Tech conference which was sponsored by the Global Midwest Partnership.  There were many sessions given over 2 days, so it’s not possible for me to summarize everything was presented, but here are some snippets of the international aspects covered there:

  • Illinois is ranked #44 in entrepreneurial activity.

Chet Culver, the governor of Iowa, pursued foreign investment aggressively by speaking abroad in Germany & Spain on a number of occasions & learning from foreigners experiences in driving public policy by simply mandating it.

The “Show me the money” session, sponsored by the Canadian consulate:  Ontario passed the Green Energy Act which created the 1st feed-in-tariff in North America with standards for certification, labeling, & packaging.  R&D investment tax credits act as a form of subsidy.  Hydro, & nuclear power can get rid of coal.  On the Toronto Stock Exchange (TSX) there are stringent requirements to get listed.  There are typically 5-8 analysts for $50M companies.  It’s easier to access brokers at the TSX.  The annual cost for remaining a publicly traded company is about $10-15,000 annually for a 75M company.  To help small-medium sized entrepreneurs expand globally, they need t0:

  • identify strategic partners in foreign countries
  • establish credibility
  • mine partners’ deep pockets to fund local projects
  • leverage partners to access local markets
  • industrial companies use debt while software companies do not
  • use banks to facilitate partnerships

David Weisberg of the Arava Institute stated Israel is #14 in # of patents issued worldwide

Ed Erickson of Erickson consulting advised using local partners to reach customers in foreign markets.  Linda Lin of FuelTech informed that fossil fuels still dominate power in China & coal plants are upping their capacities.  When marketing products in China, you need to be fast to bringing them to market.  Only contracts signed in China are valid in China.

The US Dept of Commerce sponsored the “How in the world can I do this?”  session.  They estimate clean tech will be a $40B industry & create 50,000 new jobs by 2020.  There are as of yet no SIC codes for clean tech, so it’s difficult to track statistics for it, which crosses 13 industrial sectors.  Worldwide governments have provided $150B in stimulus funds for renewable energies.  Global issues for clean tech are:

  • intellectual property
  • local content
  • transparency
  • local procurement
  • regulatory uncertainty
  • bureaucracy

The World Bank, in which the US is a 27% stakeholder, has a $6.3B multilateral target for Climate Investment funds because climate change is a barrier to investment in developing economies with transnational impact.  They are leveraging their relationships with regional banks to create a Clean Tech fund, Strategic Climate fund, etc.  They will allocate these funds at the country level to lower carbon ouputs & greenhouse gas emissions.

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invest in Turkey?

Wednesday 16 December, 2009

I was invited by the Association for Corporate Growth in Chicago to attend this breakfast briefing Investment Climate of Turkey in the Aftermath of the Global Economic Downturn featuring the President of Turkey’s Investment Support & Promotion Agency, Alpaslan Korkmaz.  He didn’t give a presentation, but here’s what he had to say:

Foreign direct investment has ballooned in Turkey from $1.8B in 2002 to $18B in 2008, & attracted more than India in 2007.  Turkey has the 6th largest economy in Europe & 15th largest in the world.  It has a large population of 72M which is quite young.  The average age is 28 & 50% of the population is 24 years old or younger.  20M are students, so education is Turkey’s top budget item.  The young population is interested in new technologies, so GSM penetration reaches 66M & the internet reaches 30M.  Although Turkey is not part of the BRIC nations, it is part of the N11, or Next 11.  Productivity growth is the highest in Europe @ 7%.  Turkey’s main competition for FDI these days is eastern Europe, but offers other advantages, such as a large market of 72M & per capita incomes of $3-10,000.  They expect growth of 3-4% next year, the highest expectation in Europe.

Q&A

  • Turkey has a secular government which is distinctly separate from Islam.
  • Turkey is an economic partner with the European Union, but not yet a full member.  This means Turkey’s agricultural products do not work under Europe’s common agricultural policy& Turks require visas to travel in Europe.  Turkey is a logistics hub for the EU & Europe has contributed 70% of FDI in Turkey.
  • A SWOT analysis of 400 Turkish companies led to changes in how to set up businesses in Turkey.  A telephone hotline was created to facilitate permits.  Set-up can happen within 1 week in 270 industrial zones, but it takes longer outside of those zones because of land ownership issues
  • Inflation is now under control in single digits, so Turkish businesses can finally plan 3-5 years & not worry about plans falling through.
  • Private equity/investment bankers are investing in renewable energies (2nd best wind map in Europe) & automotive.  Istanbul airport renovations were 100% privately funded.  Financing is available for middle-market companies.
  • Turkey’s biggest challenges are matching the last 6 years’ growth, resisting bureaucracy, & sustaining education.
  • Labor laws are more liberal than the European Union & eastern Europe.  They work the most hours/week in Europe, 53, with the lowest absenteeism.  There have been 0 automotive strikes in 30 years.
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russian conference in chicago or how not to go global

Monday 14 December, 2009

I attended the 1st day of this Russian National Exhibition @ McCormick Place.  I was invited by & RSVP’ed to World Business Chicago, but when I introduced myself at the registration desk, they had no record of my registration.  They gave me a badge upon which to write my name & sent me on my way.  I attended the 1st conference to give me a feel for the economy in Russia today which started a 1/2 hour late “because of the weather in Chicago.”  I found a sparsely attended session given mostly in Russian, with softly worded simultaneous translation provided.  I walked the barren exhibition floor, spoke briefly with the organizers, & stuck around for the cocktail reception.  They trotted out the typical appetizers as we were greeted with a musical extravaganza right off of a Las Vegas stage.  Scantily clad dancers made many many costume changes & danced to many different styles of music.  I can honestly say this was the 1st time I’ve seen a show quite like this.

My distinct impression is this was an event organized by a foreign group who took very little input from local organizers.  It appeared to be a conference by Russians for Russians, but Chicago is 1000’s of miles from Russia.  Because much was done in Russian, my thought was maybe the organizers were targeting Russians living in Chicago, but according to people with whom I spoke, that wasn’t the case.

Hand-written name badges are not the professional standard at McCormick Place.  Weather in Chicago is not a valid reason to waste people’s time & start late.  Normally simultaneous translators are in a booth so that you can’t hear them.  At the conference they were in the corner of the room & had to speak so softly that we couldn’t hear them well at all through the headsets.  (1 of the translators actually said “I don’t know this business dialogue.”)  The online catalog contains numerous misspellings (can you figure out what “metallutgy,” &  “farmacy” are?) & grammatical errors.  All of the advertising in the hardcopy catalog is in the back, about which I would not be happy if I were an advertiser or even a reader.  The organizers said they had budget constraints in promoting the exhibition, but there’s a lot that can be done for free.

Some decent content was provided in the conference, & I feel a little bad about not writing about it here, but the bigger story is how not to put on an event in a foreign city.  The organizers seem to have run the event just like they would in Moscow, but that’s not the way things are done in Chicago.  I heard Mayor Richard Daley attended an event in Russia earlier this year & this event was supposed to be Chicago’s act of reciprocity.  I fear many American firms do the same thing in other countries & it doesn’t reflect well on us as this doesn’t reflect well on the Russians.  The lesson of this story is:   listen to the locals.  They know best how things are done.

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Renewable Energies in Emerging Markets

Friday 11 December, 2009

I checked out this event Renewable Energy in Emerging Markets hosted by the American Chamber of Commerce in South Eastern Europe held @ IIT.   Here are the presentations made that day:  AmSECC slides for IIT event final & RES final.

Nikola Milivojevic and Igor Stamenkovic of RES Technologies didn’t really have much more to say in addition to their slides, so you can check out what they had to say there.  Russell Gilchrist of Skidmore, Owings & Merrill LLP extrapolated a bit beyond his slides:

  • The Pearl River Tower has not yet achieved energy self-sufficiency.
  • CO2 in China today is like the US 150 years ago.
  • Some of their design they learned from the aviation industry.
  • Chinese building codes are more stringent than those in the US.
  • The building faces the wind directly, so that the wind is sucked through & speeds up the apertures, & this creates negative wind pressure on the leeward side.
  • Micro-turbines are the holy grail in renewable energy, but they’re only used 40-50 of 160 hours/week.
  • Radiant heating is a better solution than forced air because water is a better medium to conduct heat than air is.
  • They’re unable to use geothermal energy because the water temperatures are in not right for it.

Q&A

  • They started with 36 strategies, such as trying to get as much natural light into the building as possible,  to get the design to net 0 & 22 survived.
  • Wind turbines provide a great payback.
  • LEED certifiers should now adopt light, medium, & dark green designations to reflect the changes in green building.
  • Paybacks vary by location because raw materials & photo-voltaic differ
  • Green buildings require an 8-10% premium in additional cost, but there is still a very short payback
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what’s up down under

Monday 7 December, 2009

The Business Network Chicago international group hosted the Australian Trade Commissioner based in Chicago Ian Smith who made this presentation: Australia – A Dynamic Economic Partner 1109

Here’s what he had to say in addition to the presentation:

  • Foster’s lager is not even available in Australia because the brand is brewed by Miller Coors in Milwaukee.
  • 60-85% of the Australian population lives within 30 miles of the coast.
  • 30% of Australia’s GDP is exported-2/3 of what they produce is exported.
  • Melbourne has the most Greeks outside of Athens, Greece.
  • Boat people are creating problems when floating over from Indonesia.
  • Australia is proportionately strong:  despite only having .5% of the world population, it accounts for 1.37% of GDP.
  • Australia has not suffered from the global recession.  Mining there has contributed to China’s growth.  Their banks had few bad loans, so they’ ve maintained stability.
  • Baxter, Caterpillar, & John Deere are successful Illinois companies down under.
  • Due to vast experience with droughts, Australia is strong in water conservation.  Boeing is investing in biofuels there.  Wind & solar power are growing.
  • YellowTail wine is a great example of an Australian success story.  They’re a small family-owned firm from a town with a population of 600.  They planned on shipping 20,000 cases their 1st year , but did 100,000.  1/3 of all Australian wine comes to the US.

Q&A

  • Australia sports a world-class wireless infrastructure, although rural coverage is an issue.

Similarities/differences with Americans:

  • Aussies are too modest to mention world changing technologies
  • friendship comes before business there, the reverse of America
  • while it’s tough to reach decision-makers in the US, Aussies consider it rude not to reply
  • Aussies suffer from the fallacy “if I can just get 1% of the market…”
  • intellectual property issues are typically bigger in the US than down under.