PDF file: Annual Report 2002/2003 - Scottish Crop Research Institute

Director’s Report
so, on a per capita basis, by 2050, the performance of
the Chinese and Indian economies would lag behind
those of the Group of Seven Countries (G-7)
economies. Nations of static or declining populations
(much of Europe for example) will need to reconfigure
their economic structure to focus on wealth-creating
activities of global impact. (see Populations and
Conflicts)
Corporate Governance Strengthened corporate governance
arrangements in the MDCs were being introduced
in the wake of an undermining of investor
confidence by poor financial reporting, corporate
leadership that abused its integrity, and sheer deceit to
the point of beggaring belief. Triggered to some
extent by the collapse of Enron Corporation in late
2001 - an energy-trading company deemed by professional
investors and authorities to be highly successful
and innovative - the conviction of its auditors, Arthur
Andersen, unsettled accountancy companies worldwide
leading to the formation of limited liability partnerships.
Thereafter, various technology companies
came under scrutiny for unjustifiably inflating profits
e.g. WorldCom Inc., Xerox Corporation, and Vivendi
Universal, adding to market volatility. In July 2002,
the Sarbanes-Oxley Act was introduced in the USA,
replacing self-regulation of the accountancy profession
with a public body, reinforcing the independence of
the audit process, and insisting on the release of
timeous and accurate corporate information to the
markets. (see also Financial Reporting and Corporate
Governance in the UK Perspectives section)
China Political considerations added to the financial
challenges faced by many LDCs, whereby flights of
capital were generated by political upheavals. China,
however, weathered the financial stresses experienced
by most LDCs, as it progressed in converting to a capitalist
culture and becoming a global superpower in
terms of export of manufactured goods and expanding
internal consumer markets.
FDI Foreign direct investment (FDI) fell in the
MDCs as economic growth slowed, and mergers and
acquisitions across national boundaries – one of the
main vehicles of FDI - diminished. FDI of $621 billion
in 2002 represented just 55% of the level recorded
in 2000, the largest fall since the early 1970s.
Multinational or transnational companies for the
most part continued to expand, nonetheless, and the
total number of their employees increased to 54 million.
Coinciding with its membership of the WTO,
China was the recipient of increasing levels of FDI.
In fact, FDI into the LDCs declined only by 14% to
$205 billion. In terms of overseas direct investment
in stock which totalled $7,122.506 billion in 2002
according to the United Nations Conference on
Trade and Development (UNCTAD) World
Investment Report 2003, the major ten recipients in
descending order were the USA, UK, Germany,
China, Hong Kong (China), France, The
Netherlands, Brazil, Canada, and Spain. The top ten
global outward investors in stock in 2002 out of a
total of £6,866.362 billion were the USA, UK,
France, Germany, Hong Kong (China), The
Netherlands, Japan, Switzerland, Canada, and Spain.
USA The economic performance of the USA was
patchy in 2002, as it responded to the ending of 10
years of more or less continuous expansion. Recovery
from a brief but mild recessionary period after the
September 11 2001 attacks was remarkably brisk,
especially in the light of the sharp fall in company
profits, accounting irregularities, employment, and
inventories. Deflation was not an issue, nor was serious
inflation. Low interest rates and personal taxation
cuts sustained high domestic spending which accounted
for around 75% of gross domestic product (GDP).
Imports met much of the strong domestic demand
and increased by nearly 3.5% in volume terms whereas
exports declined by 1%. Together with increased
military and security spending, the drop in taxation
revenues accounted for a reversal in the position of the
public finances and a deficit of $159 billion was registered
at the end of September 2002, equivalent to
1.5% of GDP, contrasting to the $313 billion surplus
(3% of GDP) estimated in January 2002. A $550 US
current-account deficit was predicted for 2003.
Japan The Japanese economy declined by 0.7%, continuing
the deflationary environment established over
the previous 18 months. Non-performing bank loans
were conservatively estimated to be the equivalent of
8% of GDP, around $362 billion.
EU The euro-zone countries (Table 1) experienced
mixed fortunes as the European Central Bank operated
its ‘one-size-fits-all’ policy of keeping the overall
inflation rate below 2.5%. The national governments
of the zone had no mandated powers to control their
economies under the Growth and Stability Pact.
Consequently, highly variable inflation rates coupled
to unaffordable wage and social spending demands
placed strains on the euro-zone economy. According
to the Bundesbank and Bank of France, the European
single currency failed to boost trade between euro-
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