Finding the New Shoots of Growth..!!

As the global economy begins to exit from the deepest recession since World War II, the recovery is expected to follow a different path from those of recent memory.

What, and where, are the new drivers of growth?

Key Points on the Topic
• Economic crises are often accompanied by rapid periods of innovation. New business models and technologies emerge from the ashes to become the new drivers of growth.
• China, India and Africa will lead global growth in the coming decades, particularly in sectors such as renewable energy, information and communication technologies, and biotechnology.
• The Middle East is becoming more integrated globally and will become an important new source of demand as well as a source of capital.
• Innovation does not come without R&D and strong science and technology capabilities. Governments can help by funding these activities, while new businesses and new frameworks of collaboration are necessary to get innovations to the market.

Synopsis
Both government and business play a crucial role in the process of creative destruction. Governments can provide funding for early stage research and development and provide a “test” market for new concepts (e.g. Chinese municipalities trialling electric bus fleets). Policy-makers need to create an environment which encourages entrepreneurial activity (e.g. open economies, tax systems which support R&D, commitment to diversity).

Entrepreneurs and small to medium businesses can identify and meet new demands and new needs. Many great companies were launched in times of crisis and grew to dominate their industries.

In China, there are huge opportunities over the next two decades as the middle class emerges and domestic consumption takes hold. New shoots of growth will include renewable energy and energy efficiency (e.g. solar, wind, LED lighting, fuel cells); healthcare and biotechnology; convergence of IT networks and roll-out of broadband); advanced manufacturing and new materials emerging from nanotechnology. The challenge for China will be to make the transition from an export-dependent economy to one which is based on domestic consumption and services. India is also well placed to benefit from the rise of renewable energy (particularly solar) and efforts are focussed on reducing the cost of solar energy to below that of hydrocarbons.

Africa will be a new driver of growth, especially in the aquaculture, biotechnology and renewable energy sectors. With some countries growing in excess of 8%, the continent offers enormous opportunities and is roughly where China was 10 to 15 years ago. The abundance of mineral resources is well known, but there is also untapped human potential. The quantum leap will come as new information and communication technologies take hold.

In the Middle East, innovation has traditionally been impeded by large government involvement in the economy. With the process of privatization now in full swing, government-controlled assets (airlines and media) are transitioning to private ownership. One fertile area for new opportunities which can exploit the abundance of oil is the development of products which use oil as a key input (moving up the value chain).

New collaborative models will likely emerge, such as arrangements to share intellectual property as well as open innovation (use of external resources and ideas). In this respect, the cross-border cooperation demonstrated by the G20 in response to the financial crisis is a good model.

Happy Reading...!!!