Archive for April, 2011

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doing business in india

Friday 29 April, 2011

Walter Vieira was back in town as a guest of the British American Business Council & Organization of Women in International Trade @ this event AN INFORMAL DISCUSSION ON CHALLENGES AND OPPORTUNITIES IN INDIA  I wrote about Walter’s last visit to Chicago Indian consultant’s take on India & he certainly does know marketing in India.  Here’s the presentation he gave Doing-business-in-India which can also be found here.  Here’s what Walter had to say in addition to what’s contained in the presentation:

India is a land full of contradictions: growing companies are energized, while lazy city workers leave the streets dirty.  Power plants are highly efficient, while Indians are inefficient in cleaning the toilets.  Multinational companies need to be in China &/or India as the 2 of them combined comprise 2/6 of the world’s population.  When entering India, there are 3 issues to consider

  1. is there a need, but no market?
  2. is there a market, but no customers (because of corruption) ?
  3. are there customers, but you’re not able to reach them with the right salespersons, distribution, etc.?

India has many different varieties of vegetarians, & the lowest prices @ McDonald’s restaurants in the world.  Dominoes Pizza changed their delivery deadline to simply anytime before the next meal.  Interestingly Indians keep their water glasses on their left so that they can eat food with their right hands.

8 Indian companies are listed on NASDAQ & the UN says India will become the world’s 3rd largest economy in the next 5 years. Inflation in India is really ~20%. Mobile communications is changing the face of India as 3.1M Indians start new mobile phone subscriptions every month.  Walmart is keen on India as LG & Samsung from Korea have done well there.

Recently the size of India’s middle class exceeded that of the poor, either of which is larger than the population of the US.  Literacy in India is defined as being able to sign your name, so literacy statistics are overstated, according to Western definitions.  There are 1400 major infrastructure projects going on right now in India.

Q&A

  • corporate social responsibility is becoming the flavor of the day in India, as it’s become a part of annual reports.  The government encourages firm to donate 2% of their profits, but legislation won’t help.  Tata donates 95% of its profits to charities.  2nd level institutions start schools/colleges, give away smaller %’s, & label everything for the branding.
  • There is a plan & eminent domain will prevail in building highways & infrastructure like the highway from Delhi to Mumbai, even though democracy & religious sensibilities (must build around temples, mosques, etc.) get in the way.  Dwight Eisenhower got the idea for national highways from Hitler’s Germany, & Ike met lots of resistance to supporting them.  But India has no Ike-their president is simply an honest man presiding over a bunch of crooks.
  • India’s relationship with China is complicated.  The Chinese have the advantage of being in a dictatorship that provides strong leadership, which always rules, regardless of the system.  India’s democracy requires education & literacy, but this makes for slow decision-making.   India is leasing a region in it’s northeast to China for 20 years for them to clean it up & then return it.
  • LG & Samsung have been successful in India because of , unlike Americans, their lack of arrogance.  They probed for the needs of the Indians & then reoriented their products to meet those needs.  To contrast, an American Kellogg’s executive questioned whether there was a “market for cereal in India.”  They thought “We taught the Japanese in 4 years, so it will take 7 in India.”  That CMO was recalled in 3 years, & the successor had success promoting cereal as a healthy mid-morning snack with vitamins.
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global higher education in the midwest

Wednesday 27 April, 2011

President Emeritus of the University of Michigan James Duderstadt has written a Heartland Paper entitled A Master Plan for Higher Education in the Midwest for the Chicago Council on Global Affairs, which hosted an event Reforming Higher Education to Compete in the Global Economy to introduce it, which featured a panel discussion with Michael Hogan, Pres. of the University of Illinois, & Jerry Sue Thornton, Pres. of Cuyahoga Community College.  The discussion was moderated by Donald Stewart, former Pres./CEO of the Chicago Community Trust.  Marshall Bouton opened by noting that education is the single biggest variable in how economies compete, & that despite American spending 2X as much per student as other countries, achievement gaps persist.  McKinsey ranked the US educational system 18th out of 24 countries.

Duderstadt put forth 4 new conditions in higher education

  1. new knowledge, innovation, & transformation are required
  2. these imperatives will only intensify
  3. our diverse population requires public & private investment in infrastructure & new public policies
  4. urbanization & the breakdown of geographical boundaries no longer serves manufacturing-we need brains now, so our most valuable assets are our schools, but higher education can’t be decoupled from primary education

From these, he draws 3 conclusions

  1. geographic boundaries are irrelevant
  2. we must shift from a competitive mindset to collaborative relationships
  3. we need a systematic & strategic approach to create a new knowledge ecology

K-12 recommendations:  We need to require all high school students earn diplomas, but we’ll need to restructure this level of education & provide the resources to do this well.  Universities need to get more engaged in K-12 education.

Higher education recommendations:  we need to;

  • change policies to increase participation & funding
  • make others aware of the importance of higher education
  • challenge ourselves to demand 0 defects results in schools
  • gather best practices from around the country & world
  • make learning a lifelong activity
  • renegotiate social contracts
  • find alternative funding options, i.e. graduation taxes, Kalamazoo promise, etc.
  • encourage diverse missions, i.e. research to drive innovation, for-profit schools for adults, etc.
  • make success in college lead to success in life
  • look at new institutions like German gymnasiums, EU Polytechnics, & British Open Universities
  • simplify intellectual property policies to encourage faculty to spin off new technologies, perhaps by getting them to invest their own assets
  • create a highly skilled workforce with a firm public purpose, not short-term fixes

panel Q&A

  • Community colleges are local entities-85% of graduates stay locally, but we need to change the culture of communication & rather than waiting for manufacturing to return, become a part of the innovation supply chain to export more
  • The University of Illinois is a national/international institution which has 7.2% foreign students & the curriculum has been globalized.  Our challenge is to convince citizens that our economy can’t do well unless we fund education.  Research universities have been the hubs of rebirth in Pittsburgh & Cleveland.
  • The Bologna Process in Europe has involved Ministers of Education, faculty & others which has resulted in a transformation which serves as an example of how to achieve change-the opportunity costs are great.
  • Community colleges must create better transitions to other schools & careers.
  • California’s Plan created a highly differentiated educational system-now we need to re-differentiate.  We need to put institutions together:  UI is fragmented on 3 campuses, so we need to integrate & consolidate
  • Societal leadership is required at all levels to bring about change.  We need to bring $ back to states in new social contracts.  Schools should have fewer regulations & greater control of their own revenues.
  • State funding has dropped from 70% to 4% for UM, so it’s now only a state located school.  We must build a culture of public engagement & collaboration like the Committee on Institutional Cooperation, the longest standing organization of research universities.

Open Q&A

Since we don’t have extra $ lying around for education, we have to challenge our institutions to streamline & collaborate.  We have no national strategy for higher education.  We need to make a cultural change to increase its importance.  On 1 hand, UI’s purchasing power is the same as it was in 1970 & it’s now serving 75K students, so they’re highly productive.  On the other hand, we can all still do a better job, for example, UI has the lowest non-resident student population of 21%.  The Big 10 average is 33%, so UI suffers from a lost revenue deficit.  Different student populations create better learning environments.

Education itself doesn’t create jobs: innovation & entrepreneurship do.  But a college education is now required to reach the middle class, & the % of the population earning bachelors degrees is falling.  We need to train more educated people for global positions, not fewer.  It’s not always appropriate to make a direct link from higher education to job skills.  College teaches you how to think & solve problems, so it’s a preparation for your last job, not your 1st.

Unions of university workers impact upon the flexibility of work rules, but are usually not a detriment & are not for faculty.

To better engage K-12 schools, we should

  • place college faculty in high schools to create better awareness, visibility, & collegiality
  • extend the school year to year-round
  • help students see the possibilities
  • make teaching a higher status occupation like it is in Europe-it’s part of our culture that our teachers earn the lowest SAT scores in the world

my $.02-1 thing they missed:  To compete in the global economy, you have to engage in it.  We enculture our students to be insular & parochial when we require them to learn state rather than world history & discourage the learning of other languages.  We need to create curricula which educate students about the rest of the world as much or more than we trumpet how great America is.  We need to learn more about the Chinese, Indians, Europeans, Latins, & Africans if we’re going to compete with them.

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PBS video on the fall of the wall

Thursday 21 April, 2011

The Chicago Council on Global Affairs hosted a screening of the video After the Wall: A World United & hosted a panel discussion immediately afterwards Germany United: The Story of a European Powerhouse featuring the director/producer/writer Eric Stange, Christian Friedrich Ostermann, director of the Woodrow Wilson Center’s European Studies Program, & J.D. Bindenagel , who was U.S. deputy chief of mission at the U.S. Embassy in Berlin, East Germany, at the time of the fall of the Berlin Wall in 1989. You can watch the preceding video The Wall:  a world divided @ the bottom of the above-mentioned webpage.  You can rent the video we saw on Netflix & see it aired on Chicago’s WTTW on 8 May.   Here’s a summary of the panel discussion.

All of this was predicated on Gorbachev’s commitment to non-violence & non-intervention.  It was not just the East Germans who opened their borders, it was the Poles & Hungarians as well.  The reform of travel rules was an accident, & the result was the breaking down of the wall when an East German official mistakenly gave the OK to the mass media to report that the wall was open before it really was.  Prior to the fall of the wall, the Americans were pretty much MIA in recognizing the imminent changes.  Bindenagel was struck by the pace of what happened, as if it were a video on fast forward.  Conventional wisdom held that the USSR would defend the DDR, but the 1st meeting between Bush & Gorbachev didn’t happen until 3 December, 1989 when the DDR was on the verge of civil war while 400K Soviet troops stood by.  Demonstrations in Dresden & Leipzig set the popular mood, so it wasn’t just East Berliners who made the 1st moves.

This documentary was created because George HW Bush didn’t think Americans knew enough about the significance of these events & wanted to give Gorbachev credit for what happened.  Researchers found leaders of resistance who risked everything before the wall fell.  Ironically, organized religion was the chink in the Soviet armor because it became a sanctuary for activists.

Q&A

  • The economic impact @ 1st was drastically negative on the united Germany, when they created a monetary union & converted East German debt into West German debt-it killed them.  They’ve paid $100B for each of the last 20 years, which has been equated to 4 Marshall Plans.  The longer term effects are still being determined.
  • There was some resentment on both sides after reunification, but it had to be done.  The US encouraged $8.5B in investment in the 5 new federal states by Dow Chemical, Guardian Glass, etc., which created great relationships for US businesses through these investments.  There was an exodus of skilled labor from east to west, which created labor shortages, which were also fueled by low birth rates, & globalization.  Germans questioned immigration policies & multiculturalism in asking how open they were to foreign workers.
  • The main difference between the fall of the wall & the recent “Middle East Spring” is the level of violence, which changes everything.  In East Germany, the Stasi headquarters was attacked, but there was no violence.  The West German constitution had article 23, which allowed older parts of Germany to rejoin, so there was already regulatory governance structure to allow it to happen.  Germany had Helmut Kohl leading the charge, although he originally couldn’t conceive of reunification, he proposed confederation.  Reunification was proposed by a Russian to him.   So Germany is very different because it had prefabricated solutions in NATO, the EU, etc.  Also, those who made the revolution did not end up running things.  The situations are a little bit similar in that the East Germans’ future looked bleak, & they felt they had little to lose by change, which is a similar mentality to that they had in Egypt.
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environmental rights comparison between Europe & India

Tuesday 19 April, 2011

John Marshall Law School’s Center for International Law hosted this lunch & learn program ENVIRONMENTAL RIGHTS – AN INTERNATIONAL AND COMPARATIVE PERSPECTIVE featuring Prof. Mark Poustie, Head of the law school @ University of Strathclyde in Glasgow, Scotland.  He 1st likened environmental rights to human rights, & compared them to civil & political rights ( for ex. rights to self-determination).  Are they like the right to life?  Are they substantial, procedural, or both?  A comparison between Europe & India ensues.

The Stockholm Declaration in 1972 stated “Man has the fundamental right to …an environment of a quality that permits a life of dignity & well-being.”  By 1992, the Rio Declaration declared, “Human beings are at the centre of concerns for sustainable development.  They are entitled to a healthy & productive life in harmony with nature.”  The African Charter treaty of 1981 articulated, “All peoples shall have the right to a general satisfactory environment favourable to their development.”  The San Salvador Protocol in 1988 says, “Everyone shall have the right to live in a healthy environment…the State’s Parties shall promote the protection, preservation, & improvement of the environment.”   Finally, the Aarhus Convention in 1998 ambles on, “Recognizing that adequate protection of the environment is essential to human well-being & the enjoyment of human rights,…Recognizing that every person has the right to live in an environment adequate to his or her health & well being…”

There are a number of explicit environmental rights which have been adopted.  A number of existing civil & political rights have been re-interpreted to have an environmental dimension, although more at a regional than global level.  It’s unlikely that there will be customary international universal right to a clean environment.

Europe greatly depends on permits issued by integrated national or regional agencies for pollution prevention & control.  Inspection powers & enforcement mechanisms with reasonable degrees of enforcement activity underpin criminal law in the UK & civil penalty system in Germany.  There are extensive rights to access to information.  These are supplemented by emissions trading, environmental taxes, etc. There are limited restrictions on taking actions against state bodies.  The European Convention on Human Rights provides the right to life.

By comparison, India’s permit systems are operated by fragmented State Pollution Control Boards.  They provide inspection powers & rely on criminal law for enforcement, but there are serious problems of under-enforcement, & few alternative mechanisms.  There was very limited access to information until 2005’s Right to Information Act.  The public sector is largely immune from tort action.  India’s constitution provides the right to life.

Europe & India are similar, in that both involve re-interpretation of existing rights.  Most focus on failure by state authorities to regulate or enforce adequately, but there is a reluctance to challenge major governmental projects.  India differs from Europe, in that:

  • it takes a less gradual approach to the development of rights & remedies available
  • access to justice is broader
  • resorting to litigation is much swifter
  • European Convention on Human Rights qualifications are less apparent
  • there is a less structured approach to decision-making
  • it’s a national system as opposed to a regional international system.

The value of environmental rights is in being able to address failures to regulate or enforce by state authorities, which helps ensure fulfillment.   Environmental rights are limited by:

  • issues not directly impacting human rights
  • definition issues-what’s a clean/healthy environment?
  • constitutional problems-are judges best placed to adjudicate complex multi-faceted claims involving resource allocation?
  • rules that impact on effectiveness
  • conflicts between human rights & environmental protection
  • weakening systems of environmental administration
  • culture change in public administration

re: environmental rights & climate change:

  • climate change will have an impact on human rights
  • climate change focuses on aggregate human welfare & recognizes different levels of development
  • environmental rights may help further progress with development of a post-Kyoto regime
  • environmental rights may shift focus from aggregate human welfare to the need to assist individuals with adaptation & mitigation
  • will a lack of universal environmental rights limit the usefulness of rights-based approaches to climate change?

Q&A-The court of international justice has indirectly recognized environmental rights & confirmed sustainable development as a principle of law.

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the future of cities

Friday 15 April, 2011

I caught this Young Professionals event put on by the Chicago Council on Global Affairs The Future of Cities: How We’ll Live Next & boy, it showed.  Greg Lindsay was pumping up his book “Aerotropolis:  The way we’ll live next” while Jeanne Gang kept right up with him, pushing her’s, “Reveal.”

GLOBAL CITIES-As of 2006, the world officially became urban when it’s population crossed the 50% threshold, which will total 3B in 30 years.  Gang’s architecture firm is working in Hyderabad, Mumbai, Taiwan, & Shanghai.  Different climates dictate different architecture, as does culture, i.e. India’s concept of feng shui leads them to want to interact, so they design in more common areas.

SUSTAINABILITY-China is building infrastructure before it’s actually needed, in anticipation of what they’ll need.  Now we need to build cities that are more dense to concentrate knowledge.  Another advantage to density is greenhouse gases per person are lower in cities.  Water quality is another issue:  it’s a problem when city’s sewage overflows with 1/8″ of rain.  There is a zoning problem re: trains;  there is a limit of 5 story buildings above train stations, so we need to rezone density.  Low rise buildings are not a solution to preserving the social fabric because people will just move farther out.  China has buildings that look like Chicago’s high rise Cabrini Green projects, but the Chinese buildings are active & vibrant.

INSTANT CITIES-A developer in China was asked to build a city the size of Boston to house ex-patriots, so the developer incorporated the best from many different cities, but character still counts to bridge the generic with the novel;  we’ll see in 150 years if these have it.  The key is to create that social fabric while each city responds to it’s own different climate.  Governments & corporations are building cities in the United Arab Emirates.  China is moving into the interior of the country, of which Chicago is already a good example.

Q&A

  • Youngstown, Ohio is an example of a shrinking city where the goal is no longer growth, rather to simply be sustainable by creating more green space in the city, etc. which can be cheaper.  There are now shrinking cities conferences.
  • There is no optimal size or upper limit for a city.  Cities violate all laws of biology, i.e. they double in size & get an additional 15% increase in productivity.  Cities are changing into communities of villages today.  They are hyper-connected with no boundaries.  Online connections are reducing the need for cars & when you do need to go someplace, people are finding it’s better to talk on your iPhone on the train rather than veg out in your car.
  • Chicago was actually an Instant City when it was rebuilt after the Chicago fire.  That same process will happen elsewhere, as there is an urgent need due to migration to cities.  Singapore understands it’s limits in resources & they were the 1st to recycle gray (disposed) water, institute congestion pricing on cars in the city, & is now getting into the consulting-to-cities business.
  • Urban agriculture is bringing food infrastructure into cities with hothouses, vertical farms, etc.  The bottom million of the world population simply wants access to these mature markets.  The biggest obstacle is the size of the area required to raise farm animals.

I realize the content here is all over the place, but that’s how the conversation went.  It’s not me.

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Austria & eastern european entrepreneurship

Tuesday 12 April, 2011

The Austrian consulate general & American Southeast Europe Chamber of Commerce hosted ENTREPRENEURSHIP IN SOUTHEAST EUROPE: A VIEW FROM VIENNA featuring Thomas Schnoell, Consul General of Austria in Chicago, & Dr. David Pistrui, Managing Director of Acumen Dynamics, LLC.

Schnoell worked in the western Balkans for 10 years, so he knows the area, which because of its geographic proximity, is a foreign policy priority.  90K Bosnians came to Austria & have been successfully integrated.  He feels the EU has fallen off the radar, & this is a positive development.  War there is now inconceivable-political stability reigns.  Economically, this area should achieve 3.6% growth & banking is more stable.  Visa liberalization (except for Kosovo) has isolated movement restrictions.  However, the rule of law & an independent judiciary need to be improved while corruption & organized crime must be fought.  Austria supports a European-wide perspective, but the closer they get to full membership, the more their support falls.  Now there is no alternative.  That’s in everyone’s best interest.  When the EU last enlarged from 15 to 27 countries, trade tripled from 150B to 450B Euros.  Politically, Vienna doesn’t see Bosnia Herzegovina as a viable state because it can’t speak with 1 voice.  The EU sought constitutional reform, but the country is still governed by an international authority.  Vienna also supports a separate Kosovo, as long as Serbian rights are protected.  Austria was the 1st advocate of Serbia, but the EU is still split as 5 countries still don’t recognize Kosovo.  Southeastern Europe & the western Balkans offer huge potential.  The ascension of Kroatia will come to an end soon.  Their bilateral issues with Greece will be resolved, integrating 2 former enemies into close friends.

Pistrui started working in Romania in the 1990’s & noted Vienna is the anchor for south-eastern Europe.  He actively promotes the entrepreneurship program @ the Austrian School of Economics, & notes you can’t separate economics, politics, & culture.  All this has deep roots in Austrian thinking, as family-owned businesses, 30% of which are 2nd generation, drive growth.  There is a difference between entrepreneurship & small business in that the growth mindset differs, & self employment is not promoted.  Starting a business gets more challenging as you move farther east, although you can open a business in a day in Macedonia.  In the EU, 99% of SME’s created 65M jobs.  In Austria, 99% of businesses created 1.4M jobs.  In south-eastern Europe, this is the 1st generation of accumulating wealth.  Opportunities bubble up & change every month, but they’re volatile & relationship driven.  Governance is an issue & there is a lack of transparency.  They need better education to build the talent pool & to provide a better structural framework for business, i.e. get the government out of the way with less bureaucracy on the way to entrepreneurship.  Entrepreneurship is the best path to civil society & drives market economies.  The perception of failure needs to change:  in the U.S. it’s a badge of honor;  in Germany, you can then no longer be the president or ceo of a company.

Q&A

Challenges to entrepreneurship in south-eastern Europe are:

  • access to capital-no angel investors or venture capitalists to be found
  • bureaucratic regulations are daunting
  • finding qualified people with a mindset other than following protocol is difficult
  • corruption
  • fluctuating real estate prices
  • political uncertainty
  • the perception that entrepreneurship is a “dirty” profession

There is a generational crisis in Romania in that kids are now feeling entitled

Health care in Romania can be improved by:

  • paying doctors better
  • encouraging private medical practices
  • partnerships
  • reducing cigarette smoking

I requested Pistrui’s presentation, but he hasn’t sent it to me yet.

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McKinsey & Boeing on India’s momentum & infrastructure

Friday 8 April, 2011

The Chicago Council on Global Affairs hosted this event India’s Economic Momentum and the Infrastructure Challenge featuring Jaidit Singh Brar of McKinsey-India,  Varun Bajpai of SBI Macquarie Infrastructure Management, & Rik Geiersbach, VP-Corporate Strategy @ Boeing.

Jaidit opened by noting that India’s infrastructure is behind on all parameters & needs massive investment of $1.5-2TR to catch up with their quality of life.  Because a water shortfall of 50% is expected, river basins are centers of economic activity.  The rural population is moving to the cities which will result in urbanization of 50-60% by 2030.  Unfortunately India has a poor track record of building infrastructure, which could derail growth, but that’s unlikely.  Consumer markets are attractive because they are relatively unregulated.  All infrastructure opportunities are open to the private sector & foreign investment, although few participated until 2005.  During Y2K-2010, infrastructure firms provided 4 out of the 5 best returns.  Power projects provide 30% returns annually.  Capital & skills availability make it 30-40% cheaper to build infrastructure in India.

80% of the capital raised for Varun’s State Bank of India-backed firm came from mature markets.  By 2025, 70% of India’s population will be of working age.  India’s economy is very inward-looking, but domestic consumption is high.  The conservative banking system has been relatively untouched by the financial crisis & Indians have the highest savings rates in the world.  Rising GDP leads to increased consumption, which leads to the need for infrastructure.  India is already @ the bursting point.  12 megawatt power plants are being built.  Regulations were a problem 10 years ago, but are no longer a barrier to entry.  For example, the telecom industry used to be convoluted:  now they have the cheapest phone calls in the world.  Although India’s infrastructure deficit consists of made-up numbers, their spend must simply be faster & deeper.  India’s is a slow moving democracy, but it always moves forward.  Large pension funds are investing in large projects like privatising airports.  Corruption is a problem, but the investment climate is sophisticated.  They could do more MNC investment, but they’re doing it already via partners.  All large private equity funds have offices in Mumbai or Delhi, but their local exposures are small.

Geiersbach observed that Boeing can’t ignore India’s opportunity set, which will be  the largest aviation market in the world.  That market’s growth is 18% from 140M passengers/year to 420M, while cargo traffic grew 80% in 2010.  There are 5 major airports in India & air traffic management is another growth area.  Security & environment are issues there.  India falls between China & the Middle East in terms of regulations & liability.

panel Q&A

  • Political connections, presence, & good partners all lead to creating a successful business in India, along with a fully differentiated offering.
  • There are still regulatory challenges in defense industries, but they are hungry to refresh old Soviet equipment.
  • While it’s simple to have standard cooperative agreements, equity partners are another story.

open Q&A

  • Corruption is a huge systemic problem, but the economy still does well.  Flagbearers are needed on some issues.
  • India is a complex country in which states compete for investment.  Working there requires a local presence because something is always simmering below the surface.  1 state has cleaned up its act & maintains its own standards.
  • India has the inspiring goal of putting a man on the moon by 2020.  108 of 126 defense planes will be produced in India by Boeing.  Although there is some debate on how much technology should be shared with Indian counterparts, Boeing is not holding back.

McKinsey left this document with the attendees India’s urban awakening which seems to contain a trove of information on India’s infrastructure.