Thursday, January 27, 2011

Trends that are shaping the World – part 7

The final mega-trend that is likely to have a significant global impact over the next 10-15 years is the increasing role of governments as enablers of the globalisation of markets, labour and capital. The role and success of governments will be critical across three areas:

1. Realising growth - Governments are likely to play an increasingly important role in delivering the growth potential of BRIC and other ‘emerging’ economies. As compared to the US and Europe, Asia may have favourable demographics but significant investments in infrastructure, education and healthcare must be carefully managed and executed for projected growth to be realised. This is easier said than done, particularly in countries with high corruption and less than exemplary track records in managing such investment.

2. Legal and regulatory environment - We have seen several issues in the past 12 months surrounding this, namely Google in China and Research In Motion in the Middle East and India. As globalisation continues apace, there will no doubt be other points of friction between global companies and national governments.

3. Competitiveness -  Governments will play a critical role in driving individual countries’ competitiveness. How they level the playing field between local and foreign companies, corporate taxation as well as the social models they adopt will all have an impact on the types of societies they become, the kinds of companies they attract and ultimately the direction in which countries develop.

On the flip side, globalization is about increased integration on a global scale. It is about how governments will work together on global issues such as sustainability, climate change and terrorism, to name a few (and not how they develop their own countries). The enlargement of the G8 to G20 is a recognition of the fact that economic power is re-balancing globally, but with power comes responsibility. As such, the most important role of governments may well lie in addressing cross-border issues.

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