Global Investor 2.13, November 2013
Expert know-how for Credit Suisse investment clients
Easing global gridlock
Fold out the handle, and
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so just punch them out and flip
them up to form the handle. You’ve
now got a little briefcase of sorts, and
you’re good to go, as Global Investor
explores the New Mobility. Be it just
up the street, across the continent,
or around the world, we’re moving in
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Martina Lubyová Labor migration entails costs as
well as benefits. Ian Goldin An expert weighs in
on the modern migration debate. Pedro Conceição
Economies and education have improved, but
in Africa there’s still a paradox that exists.
Dario Hidalgo Mass transit is stretched to the limit,
and in serious need of a sustainability rethink.
GLOBAL INVESTOR 2.13 Editorial — 03
Photos: Chou Chiang | Martin Stollenwerk
Responsible for coordinating the focus
themes in this issue:
Nilanjan Das, CFA, is Research Editor
of Global Investor and Head of Global
Research KPO. He leads a crossasset
research team covering global
equities, bonds, currencies, economic
and thematic research. He joined
Credit Suisse in 2009, bringing 15 years
of research and banking experience,
including positions at J. P. Morgan Global
Research and ICICI Bank. He is a
postgraduate from the Indian Institute
of Management, Bangalore.
Sara Carnazzi Weber joined Credit
Suisse in 1999 and is currently a senior
economist responsible for long-term
macroeconomic issues. She has
ten years of experience in regional and
spatial economics and contributed
significantly to the development of the
regional analysis unit within Research.
She holds a doctorate from the
University of Fribourg.
At certain moments in history, a cluster of innovations reaches a point
of maturity and comes together to create radical change. Steam
power, railways and the assembly line came together in the mid-19th
century’s wave of industrial globalization. After World War II, efficient
air-conditioning, electricity grids and cold-chain logistics triggered a
US productivity boom as factory conditions improved, and allowed
rapid development of the US Sun Belt and then Asian hubs such
as Singapore and Hong Kong. Typically, these clusters occur when
new technologies combine with relatively old ones to create something
radically new that is greater than the sum of the parts.
Today, we see three such clusters, all related to mobility. First,
low-cost Internet-based communications like Skype and cheaper
money transfers combine with the existing technology of long-haul
air travel to transform the concept of immigration from the old model
of lifelong change requiring permanent separation from friends and
family, into a temporary, intermittent activity in which close contact is
maintained with home. Second, the application of modern informationbased
control systems to relatively old automotive and bicycle technologies
presages a revolution in urban and eventually interurban transport.
And a third is waiting in the wings: the explosion of Internet-based
learning can help social mobility, for which education is key.
In this issue, we examine how this New Mobility is set to transform
economies, lives and social interactions around the world. These effects
may prove vital in emerging countries, where trend economic
growth seems to have slowed. Lack of infrastructure, income uncertainty
and in some cases labor bottlenecks are all possible causes.
The New Mobility offers some potential solutions, reducing the scale
of physical infrastructure investment needed to relieve urban gridlock,
supporting consumption by opening new income streams from migrant
workers, and upping temporary labor supply in countries facing shortages.
Those countries that embrace these solutions will benefit from
a new potential way to reinvigorate growth.
Giles Keating, Head of Research and Deputy Global CIO
GLOBAL INVESTOR 2.13 Contents — 04
If there’s one constant when it comes to human nature and activity, it’s the
fact that we’re perpetually on the move – whether it’s the search for
safety and security as millions flee war-torn regions of the world,
the hope for a brighter economic future elsewhere, simply
trying to make sure we get through the morning
commute without being delayed, or making
a concerted effort to climb the rungs
toward a higher standing within
the social order.
> Pages 08, 18, 30, 44
GLOBAL INVESTOR 2.13 Contents — 05
The New Mobility
Information technologies are reconfiguring the way we travel,
work and communicate. Giles Keating explores how the New
Mobility will impact economic growth.
Migration: Good or bad?
Is international migration posing a problem, or rather a solution?
Ian Goldin separates fact from fiction, providing a deeper
understanding of a complex topic.
Top shots on the move
Global Investor presents a collection of portraits featuring ten
top shots from around the world. Find out where they are
from, and where they are deployed. Each is unique, but what
is it that they all have in common?
Keeping cities moving
According to Dario Hidalgo, as cities continue to expand,
the need for effective mass rapid transit becomes all the more
important. He explains why more roads aren’t the answer.
So far, yet so near
With over a billion smartphone users, mobile technologies are
already transformative. But, says Uwe Neumann, the real boom
comes once people, processes, things and data are all linked.
Innovation welcome in a USD 40 billion business
Remittances from migrants to their home countries have a
major economic impact. Christine Schmid and Javier Lodeiro
explain why and look at the role that mobile communication
technology plays in getting money to those who need it most.
Moving ahead in Africa
Where 40% of primary school students drop out,
there’s a need for more accessible education in Africa.
But as Pedro Conceição reports, learning and earnings
aren’t always directly linked.
Earnings mobility is something that citizens of all the rich
countries value. Miles Corak examines the roles that socioeconomic
background and education play in that regard.
National migration policies are a complex matrix where demographics
and economics intersect. Martina Lubyová explores
the topic of managing labor mobility in a globalized world.
New mobility models needed
Urban streets are chronically congested, slowing commuters
and goods while choking residents with pollution.
Andrea Schnell and Thomas Rühl present some new solutions
to what has become a long-standing problem.
How ideas spread
If there’s something worth sharing, Duncan Watts wants to
know about it. He’s made a career of studying how and why it
is that some ideas get passed up, passed along or “go viral.”
The China travel surge
Tourism from China is booming – to such a degree that
China plans to build 70 new airports by 2015. Scott Booker
reports on the travel explosion that was worth USD 102 billion
Disclaimer > Page 56
Podcast on www.credit-suisse.com/globalinvestor
The information revolution is opening up new ways to leverage the “old” economy.
New control systems ease traffic on congested highways, teaching
expands beyond the classroom, family ties are no longer broken by distance.
Does this offer hope for improving the disappointing growth rates
now affecting both developed and emerging countries?
TEXT Giles Keating, Head of Research and
Deputy Global CIO, Credit Suisse
The digital technologies are starting to transform mobility,
affecting people, traffic and ideas. First, new cheap
ways to transfer small sums of money across borders and
almost free international communication (Skype, Facebook
...) are now combining with low-cost long-haul air
travel to change mass migration from the traditional
model of lifelong upheaval to a new era in which mass
migration can be temporary, and close contact with home
is retained. Second, the application of modern information-based
control systems to the old technologies of
automobiles, bicycles and public transport promises a
revolution in urban and eventually interurban transport,
squeezing far more passenger journeys from existing overstretched
infrastructure. Third, Internet-based learning,
still in its infancy but growing rapidly, has the potential
to reach vast numbers of people, greatly magnifying the
social mobility that education brings. Taken together, we
call these three phenomena “The New Mobility.”
The changing shape of migration is difficult to measure
directly, but some telltale indicators give an idea of what
is happening. In the Philippines, one-tenth of national
income is now earned abroad and sent home to help support
children and other family members. Much of this
money seems to come from people who have traveled
abroad to work temporarily rather than permanently, in
places such as Hong Kong, Singapore and the Gulf. Javier
Lodeiro and Christine Schmid analyze the growth of these
money flows on page 26.
Large numbers of people also travel from the former
Soviet Republics to get temporary work in Russia. As an
example, in Tajikistan this brings in income worth almost
half of domestic output, the world’s highest figure. Martina
Lubyová (page 38) provides color on both the benefits
and problems faced by Russia as it receives these large
numbers of temporary workers. Gulf states Dubai and
Qatar rely heavily on temporary workers from the subcontinent
to fuel all levels of their economy from construction
and domestic service to fund management, while,
within Europe, London is a clear temporary migration
Modern telecommunications ease pain of leaving home
Physical separation from family and friends will always
be an issue, but modern telecommunications mitigate its
effects substantially. Long-distance international phone
calls now cost pennies – barely two decades ago, they were
an almost unaffordable luxury for people on low incomes.
And seeing people at a distance, largely the preserve of
expensive corporate videoconferences ten years ago, is
now available via Internet street cafés across emerging
countries using Skype, while low-end cell phones help
spread messaging systems like WhatsApp (which send
text, photos and audio clips) toward the lower end of the
income scale. Arguably, the impact of these changes in
boosting temporary migration is only just beginning.
from family and friends will
always be an issue, but
mitigate its effects
Going abroad to work for a while can bring substantial
economic benefits. For example, in the Philippines, income
from abroad has risen consistently for 15 years, providing
support even when the domestic economy was slowing
down. Of course, there are adverse effects as well, and
both good and bad effects have been widely analyzed for
traditional (permanent) migration, as described by Professor
Ian Goldin in his excellent article on page 10. The
newer phenomenon of temporary mass migration is clearly
more flexible and so should be able to offer a better
balance of good effects compared to bad. We believe that
it will grow in scale, as the cost of sending money home
falls further, cheap airfares proliferate, and services like
Skype become even more widely used.
A need for multimodal transit and smarter planning
Urban transport is starting to be reshaped by information
technology. Automated bicycle rental is now commonplace
in many cities around the world (see just one example on
page 23). Remote-controlled lanes for cars and other vehicles
are set to move from the lab to public roads within
the next few years; smartphone apps already allow passengers
to see when their bus is arriving and to identify
the nearest taxi. And in future, the boundary between
buses and taxis may become blurred, with a unified vehicle
fleet able to switch between shared and exclusive use,
and between fixed and variable routes, depending on demand.
Andrea Schnell and Thomas Rühl review these developments
(page 46) while Eric Höweler (page 49) discusses
their application to interurban travel. With traffic
in cities such as Jakarta, Beijing, Mumbai and Manila
clearly a major constraint on economic growth and highly
pollutive, and mass transit systems expensive and disruptive
to build, a new approach is badly needed. Costeffective
solutions such as bus-ways (see the interview with
Darío Hidalgo on page 20) can help, but a broader solution
is to use information technology to increase the passenger-carrying
capacity of a given road system. This has the
potential to be far cheaper and less disruptive than massive
physical construction programs.
Education is often seen as key to social mobility, but
this does not apply everywhere. Miles Corak (page 36)
shows that poor education often persists across generations
in developed countries, while Pedro Conceição
(page 32) shows that in sub-Saharan Africa, education does
not necessarily mean getting a job. Could the New Mobility
help? It could allow adults to use Internet learning to
catch up on skills they missed at school, and it could help
educated young Africans to find worthwhile work abroad
for a while, without having to leave home permanently.
Already, Internet-based learning is growing rapidly. Lectures
by professors from top universities are now available
to a worldwide audience and online courses like those
offered by Rosetta Stone provide an intuitive and yet rigorous
way to learn new languages. Even social networks play
a role, complementing formal education by spreading key
ideas, as analyzed by Duncan Watts (page 50).
Economic growth has slowed recently in many emerging
countries and their stock markets have seen periods
of major underperformance. The New Mobility may help
offer solutions. It can bring relief to the urban gridlock
that is inhibiting development; it can help to boost consumption
by opening new income streams from local
people who are temporarily working abroad, while boosting
labor supply in other places where it is needed; and it
may also be able to help relieve educational bottlenecks.
All this can be helpful for growth in developed countries
as well. Crucially, it is not just that the technologies are
there to do this; it is also that the economic incentives to
apply those technologies are rising. ●
Giles Keating is Global Head of Research and Deputy
Global CIO for Credit Suisse. His team conducts the
fundamental research key to the investment process
for Credit Suisse clients. As Deputy CIO he plays
a core role in those investment decisions. He joined
Credit Suisse over 25 years ago and has degrees
from the London School of Economics and Oxford,
where he is an Honorary Fellow. He is chair of
Tech4All and techfortrade, charities aiming to reduce
poverty via use of technology.
Immigration remains a hot political topic, though only 231 million
people, representing 3.2% of the world’s total population,
are living outside their country of origin. In absolute terms,
however, their figure has increased by 50% since 1990.
The arrow’s width shows the
number of people who have migrated
from one country to another
In 2013, 231 million people worldwide
had left their country of origin
and emigrated, with the USA being
their preferred destination. The
USA is home to nearly a fifth of the
world’s international migrant stock.
Migration: Good or bad?
The Silicon Valley advantage
Source: UN DESA
in millions, 2013
TOP 10 IMMIGRATION
COUNTRIES OF THE WORLD
RUSSIAN FEDERATION 11,048,064
SAUDI ARABIA 9,060,433
UNITED ARAB EMIRATES 7,826,981
UNITED KINGDOM 7,824,131
in millions, 2013
TOP 10 EMIGRATION
COUNTRIES OF THE WORLD
RUSSIAN FEDERATION 10,820,372
UNITED KINGDOM 5,005,941
Source: UN DESA
Cities with 1 million or more
HOT SPOT MIGRANT
CITIES OF THE WORLD
The points on the map are the cities
attracting one in five of the world’s
immigrants. Combined, these
metropolitan areas have 37 million
DUBAI United Arab Emirates
HONG KONG China
JIDDAH Saudi Arabia
LONDON United Kingdom
LOS ANGELES USA
NEW YORK USA
RIYADH Saudi Arabia
SAN FRANCISCO USA
WASHINGTON DC USA
14.3% of population
Migrant native countries
PUERTO RICO 1,685,015
EL SALVADOR 1,371,767
12.4% of population
Migrant native countries
SOUTH AFRICA 258,990
11.9% of population
Migrant native countries
RUSSIAN FED. 1,007,536
MIGRATION IS ON THE RISE
The stock of international migrants has increased by 50% since 1990. The number
of migrants rose by 77 million between 1990 and 2013, from 154 million to
more than 231 million, with Southeast Asians and Southern Africans most likely
to leave their home country.
International migrant stock as a percentage of the total population
SINGAPORE SWITZERL AND NEW ZEALAND USA ITALY
Source: UN DESA
31.4% of population
Migrant native countries
> 20% 10–20% 1–10% < 1%
International migrant stock as a
percentage of the total population
More than a fifth of the population
in Australia, Saudi Arabia, the United
Arab Emirates, Kuwait, Kazakhstan
and Switzerland are non-nationals.
Source: UN DESA
27.7% of population
Migrant native countries
UNITED KINGDOM 1,277,474
NEW ZEALAND 582,761
SOUTH AFRICA 166,731
GLOBAL INVESTOR 2.13 — 10
Throughout history, migration has always been the most important driver of human
progress and dynamism. Indeed, economic evidence indicates that migration helps economies,
both in the developed and developing world. Yet arguments around migration are
often driven by fear rather than facts. Ian Goldin brings a nuanced view to a complex topic.
TEXT Ian Goldin, director, Oxford Martin School, University of Oxford
GLOBAL INVESTOR 2.13 — 11
We live in an era of two competing narratives. The first suggests that
migrants are flooding across our borders, and that they are stealing
jobs and eroding our country’s social fabric in the process. Alternatively,
the second argues that in spite of minor short-term dislocations,
international migration is a boon: it generates innovation and dynamism
while fueling long-term economic growth. My view is that both of
these caricatures are too simplistic. The costs of migration are felt in
the short term and are local, so they have real social and political
consequences, while the benefits are more diffuse and longer term.
As with debates on trade, where protectionist instincts tend to overwhelm
the longer-term need for more open societies, the core role
that migrants play in economic development is often overwhelmed by
defensive measures to keep migrants out. The economic evidence is
clear: migration helps economies, both in the developed and developing
world. As is the case with trade and in the realm of the free flow
of ideas, shutting ourselves off from each other is harmful.
More people, more borders
Globally, the estimated 231 million migrants in the world make up
about 3% of the world’s population. Before passports became widely
adopted about 100 years ago, and particularly in the age of mass
migration of the 19th century, up to one-third of parts of Europe
emigrated and over a quarter of the population of the USA were immigrants.
While the share of our societies that are migrants may well
be lower today than in previous centuries, the number of migrants
has certainly grown. In part, this reflects the fourfold increase in
the number of independent countries over the past 100 years. This
proliferation means that people who previously moved within a country
– such as the Soviet Union – are now recorded as migrants. But
not only has the number of countries quadrupled over the past century,
so too has the number of people to more than seven billion
people. More borders and more people result in more migrants, even
if their relative contribution to our populations or economies declines.
At the end of 2012, three out of four migrants live in a small group
of 24 countries, with the USA being the most significant home for
migrants. Approximately 70 million migrants have migrated from one
developing country to another, and approximately 65 million have gone
from developing to richer countries, with about 55 million migrants
having moved between the different OECD countries, and a rapidly
growing number – currently around 20 million – having left the OECD
for emerging markets, where job opportunities are multiplying most
rapidly. The European Union is the world’s largest experiment with
visa-free labor migration. Even though emigration from comparatively
less rich countries such as Romania and Poland was substantial,
Germany, Italy and the UK were both leading sources and leading
recipients of migration. The main lesson from Europe is how few
people migrate, with migration levels seldom much higher than those
in the periods when greater restrictions applied. Given the levels of
youth unemployment of over 50% in Greece and Spain, it is remarkable
that so few young people have migrated. This highlights how the
arguments around migration are often driven by fear rather than facts.
Opportunities regarding employment as well as housing and other key
determinants of demand are at least as important as the supply-side
push factors that contribute to migration.
Why do they go?
It is dangerous to generalize about migration. Of the annual flow of
around 15 million migrants, most fit into one of four categories of
Ian Goldin is Professor and Director of the Oxford Martin
School and Professor of Globalization and Development
at the University of Oxford. This article draws on his widely
acclaimed book “Exceptional People: How Migration
by Princeton University Press in 2012.
cross-border movement: economic, student, social and refugee/asylum.
There are around 5 million economic migrants each year. Highskill
migrants bring special talents or training across borders to fill
gaps in the native workforce. Low-skill migrants tend to fill shortages
in physical labor or jobs that are less desired by the native labor
force. About 3.5 million students migrate each year. While some
countries, such as the UK, insist that students leave, others such as
Australia and the USA have gained talent by allowing certain students
to stay. For example, 68% of foreign students who received doctorates
in the USA in 2000 were still there five years after graduation.
Social and family reasons account for about 2 million migrants a year,
as individuals and families aim to be reunited with loved ones. This is
most common in the nations built largely by more recent generations
of immigrants (the USA, Canada and Australia) as well as the former
colonial empires (especially the United Kingdom and France). Conflict
and persecution push people from their homes and across borders.
Refugee and asylum seekers account for an average of about two
million migrants per year. At the end of 2012 there were 15.4 million
officially recognized refugees worldwide, with 80% of these refugees
hosted by developing countries, up from 70% ten years ago. It is
impossible to know how many undocumented migrants there are
in the world, but in the USA the estimates are that there are about
11 million out of a total number of around 50 million migrants, or about
22% of the total.
By the mid-1990s, more than 30% of documented migrants into
the USA were highly skilled. Similar trends exist in Europe. Germany
launched a “green card” program in 2000 to entice workers to fill gaps
in labor, particularly in healthcare and information technology. Concurrently,
France worked to attract scholars, scientists and computer
professionals. As a result, the percentage of skilled migrants into
EU countries climbed from 15% in the early 1990s to 36% in the >
GLOBAL INVESTOR 2.13 — 12
original 14 EU countries by 2011. This increase in high-skill labor
movement reflects the priorities of business. Firms recognize that
they are engaged in a war for talent with their competitors. Govern-
beneficial arrangement. Firms are more agile, adaptive and profitable.
Governments receive more revenue and thrive off the dynamism that
high-skilled migrants bring. Yet it is not only higher-skilled migrants
that are vital. In the USA, unskilled migrants are an essential part of
the construction and services sector. In the Middle East, the success
of Dubai or other emirates and Qatar rests on over 90% of the labor
force being skilled and unskilled migrants.
Union is the world’s
Debunking migration myths
If migrants play such a vital role, why is there so much concern? The
first myth is that migrants take jobs and destroy economies. The truth
is the opposite: migration makes economies more dynamic, creates
jobs and sparks long-term growth. In the USA, migrants have been
founders of companies such as Google, Intel, PayPal, eBay and
Yahoo. In fact, skilled migrants account for over half the Silicon Valley
start-ups and over half of patents, even though they are around 15%
of the population. There have been three times as many immigrant
Nobel laureates, National Academy of Science members and Academy
Award film directors than native ones. Such anecdotal results
are echoed systematically on a large scale. Research at the Federal
Reserve Bank of San Francisco recently concluded that “immigrants
expand the economy’s productive capacity by stimulating investment
and promoting specialization… This produces efficiency gains and
boosts income per worker.” Research on the net fiscal impact of the
immigration of Polish, Czech and other migrants to the UK from the
ten countries that joined the European Union in 2004 showed that the
migrants contributed “significantly” more in taxes than they received
in benefits and services. On a global scale, according to the World
Bank, increasing migration equal to 3% of the workforce in developed
countries between 2005 and 2025 would generate worldwide economic
gains of USD 356 billion. Some economists predict that if
borders were completely open and workers were allowed to go where
they pleased, it would produce gains as high as USD 39 trillion for >
continued on page 16
Historical overview of migration flows
The infographic below depicts a number of migratory trends throughout
the 20th century. Both the source and target destination are shown.
The reasons are varied, but economic, conflict and social migration were
the primary drivers of these migratory trends. Source: BBC
Eastern Europe to
USA and Canada
Britain to Australia,
South Africa and
Russia to Siberia
Turkey to Germany
India, Pakistan and
Sri Lanka to UK
Spain and Italy
West Indies to UK
Ugandan Asians to UK
Vietnam to Malaysia,
Australia and USA
GLOBAL INVESTOR 2.13 — 13
The Silicon Valley
TEXT Vivek Wadhwa, VP of innovation and research, Singularity University, Mountain View, CA
Venture capital amount
raised in 2012. Top five
regions make up 53%
of global VC funding
of USD 42 bn.
Source: Ernst & Young
Vivek Wadhwa holds research positions
at Singularity University and Duke University,
among others, and is the author of
“The Immigrant Exodus: Why America
Is Losing the Global Race to Capture
TOP SHOTS ON THE MOVE WHERE DO
THEY COME FROM? WHERE DO THEY GO?
At first glance, the individuals below appear to have nothing in common other than their impressive titles. Take a closer look.
All of them are well or extremely well qualified and seven out of ten have a multinational and/or a multilingual background.
With organizations becoming ever more global, managers with strong educations and cross-cultural networks
are more mobile and in greater demand – than ever. Place of birth Place of work
Photos: Bain & Co, Deutsche Bank, Newscast, Nokia, Stéphane de Bourgies, PepsiCo, Nestlé, ABB, Anheuser-Busch InBev ®, Coca-Cola
BAIN & CO
Orit Gadiesh, an Israeli-American
corporate strategist and chairwoman of
Bain & Company, holds degrees from The
Hebrew University of Jerusalem and
Harvard Business School. Through her work
and her involvement in an array of international
business organizations, Gadiesh
has worked with hundreds of CEOs and
senior executives on strategy development
and, in particular, change management
within corporations. She divides her time
on client work between North America,
Europe and Asia.
Anshuman Jain, a British citizen now
living in London, is co-chairman of the
Management Board of Deutsche Bank along
with Jürgen Fitschen. Born in Jaipur, India,
he studied economics at Sri Ram College of
Commerce at Delhi University and business
administration at the University of Massachusetts
Amherst. At the helm of a genuinely
global financial institution, Jain – a fluent
English and Hindi speaker, with some
German knowledge – is always on the move
and used to operating across cultural and
Tidjane Thiam, a dual Ivorian and
French citizen and CEO of Prudential plc
since 2009, studied in France and has a
background in advanced mathematics and
physics. He started his professional career
at McKinsey in Paris and New York before
relocating to Côte d’Ivoire to become CEO
and later chairman of the National Bureau
for Technical Studies and Development;
as Secretary of Planning and Development,
he was also a cabinet minister. Thiam
held senior positions at McKinsey and
Aviva before joining Prudential in 2008.
Stephen Elop was born in Canada, and
studied computer engineering and management
at McMaster University before
embarking on a management career in IT
and telecommunications. Elop has held
senior positions at several companies,
including Macromedia, Adobe Systems and
Microsoft. He was appointed Nokia’s first
non-Finnish CEO in 2010, but moved
back to Microsoft as Nokia Executive Vice
President of Devices and Services when
the latter acquired Nokia’s Devices and
Services business in September 2013.
Paul Bulcke, CEO of Nestlé S.A. since
2008, may have stuck loyally to his employer
since 1979, but his career has taken him
to all corners of the globe. Born in Belgium,
Bulcke has worked, or been responsible
for markets, in places as diverse as Switzerland,
Germany, Spain, Peru, Portugal,
the Czech and Slovak Republics, the USA,
Canada and the Caribbean. Unsurprisingly,
Bulcke is something of a polyglot, speaking
French, English, Spanish, Portuguese
and German in addition to his native Dutch.
Carlos Ghosn, French-Lebanese-Brazilian
manager and simultaneously chairman
and CEO of Paris-based Renault and
Japan-based Nissan, is a global citizen.
Of Lebanese descent, Ghosn was born in
Brazil but returned to Lebanon with his
mother at the age of six. He then moved to
Paris to study engineering, graduating
from École Polytechnique in 1978. The first
18 years of Ghosn’s career were spent at
Michelin (in Brazil and the USA); he has
been CEO at Nissan and Renault since 2001
and 2005, respectively.
Carlos Brito is CEO of Anheuser-Busch
InBev, the leading global brewer and one
of the world’s top five consumer products
companies. A Brazilian citizen, Brito
earned a degree in mechanical engineering
from the Universidade Federal do Rio de
Janeiro in Brazil and an MBA from Stanford
University. He joined Anheuser-Busch
InBev in 1989 and was appointed CEO
in December 2005. Prior to joining the
company, he held positions at Shell Oil
and Daimler Benz.
Ulrich Spiesshofer, who holds a
master’s in business administration and
engineering and a PhD in economics from
the University of Stuttgart, hails from
Germany. He became CEO of the ABB Group –
a world leader in power and automation
technologies – in September 2013. Spiesshofer
has worked in multiple jurisdictions,
including Germany, Switzerland and
Australia, and now runs a company with
global revenues of nearly USD 40 billion,
approximately 145,000 employees
and operations in around 100 countries.
Indra Nooyi, chairwoman and CEO of
PepsiCo since 2006, is a US citizen, but was
born in Madras (now Chennai), India. Nooyi
received a bachelor’s in physics, chemistry
and mathematics from Madras Christian
College in 1974 and a master’s in public and
private management from Yale School of
Management in 1978. Before joining PepsiCo
in 1994, Nooyi served, inter alia, as Senior
Vice President of Strategy and Strategic
Marketing for Asea Brown Boveri and
Vice President and Director of Corporate
Strategy & Planning at Motorola.
THE COCA-COLA COMPANY
Muhtar Kent, a New York-born Turkish-
American, has been chairman and CEO
of The Coca-Cola Company since 2009,
having originally joined the firm in Atlanta
in 1978. In the course of his career, he
has held a variety of leadership positions,
including General Manager of Coca-Cola
Turkey and Central Asia, President of
the East Central Europe Division and Senior
Vice President of Coca-Cola International,
with responsibility for 23 countries. He
sits on numerous high-level international
GLOBAL INVESTOR 2.13 — 16
“The core role that
migrants play in
is often overwhelmed
by defensive measures
to keep migrants out.”
the world economy over 25 years. There are, however, legitimate
concerns about large-scale migration. The possibility of social dislocation
is real. Just like globalization – a strong force for good in the
world – the positive aspects are diffuse and often intangible, while
the negative aspects bite hard and tangibly for a small group of people.
The second myth is that migration destroys developing economies
by siphoning talent away from the places that need it most. There is
some truth to this. For example, 65% of university graduates from
Morocco, 60% from Gambia, 25% from Iran and 10% from the Philippines
leave their home country, usually to move to a developed
economy. However, the so-called “brain drain” is mitigated twice over.
First, when these countries become professional training centers,
they can produce far more skilled laborers at home than they did
before the “drain” began. The Philippines, for example, provides one
of the largest sources of migrant nurses to developed economies. But
while doing so, it now also has more nurses per capita in its domestic
labor market than comparable countries and even some much
richer ones, including Great Britain. Second, remittances (money sent
home from migrant workers to their families and friends) from abroad
are integral to many developing economies. Remittance payments lift
people out of poverty. Their impact, if used for entrepreneurship or
investment at home, is often many times the original value. In 2012,
officially recorded remittance flows to developing countries reached
an estimated USD 401 billion. For Tajikistan, these flows amount to
almost half of GDP and for Liberia and Lesotho around 30%. If managed
appropriately, with good governance and smart investments, the
“brain drain” can become the “brain gain” for developing economies.
Promoting “brain circulation” by which skilled migrants are able to
return to their home countries and bring with them the technologies
and investment opportunities derived from their migrant experiences
can also play an important role in launching domestic growth, as
Taiwan, Israel and Bangalore in India demonstrate.
The bottom line
In the future, it will become even more imperative to ensure a strong
labor supply augmented by foreign workers. Globally, the population
is aging. There were only 14 million people over the age of 80 living
in 1950. There are well over 100 million today, and current projections
indicate nearly 400 million people over 80 by 2050. With fertility collapsing
to below replacement levels in all regions except Africa, rapidly
rising dependency ratios and a decline in the OECD workforce
from around 800 million to close to 600 million by 2050 is projected.
The problem is particularly acute in Europe, North America and Japan.
But the developing world will feel the pinch too; by 2050, some 20%
of India’s population and a total of 31% of China’s are projected to
be aged 65 or older.
Migrants: a key component of the workforce in major developed markets
Migrants are a vital part of the total population in a number of countries in the
developed world. The large pies show what percentage of the entire populace are migrants.
The smaller colored charts indicate the proportion that migrants make up within
specific age groups. Source: UN DESA
stock as a percentage
of the nation’s overall
Of the nation’s 25–29 age
group, the percentage
who are migrants.
Of the nation’s 30–34 age
group, the percentage
who are migrants.
Of the nation’s 35–39 age
group, the percentage
who are migrants.
18.7% 22.7% 25.4%
22.8% 25% 21.4%
GLOBAL INVESTOR 2.13 — 17
details on our
on page 8
Reasons for migration
The grounds for moving are many. But the main driver is
economic, as high-skill migrants bring specialized
talents, while lesser-skilled laborers fill short-term gaps.
Source: Ian Goldin
Despite the fact that migration is a vital element in global development,
there is no global organization up to the monumental task of assisting
the flow of people across borders. International migration is the orphan
among the alphabet soup of global governance organizations. The
International Organization for Migration is not part of the United
Nations and could be transformed to play a more active, treaty-based
global role. A first task is to establish an agreed definition of migration
and develop a global database, as there is no common statistical
basis for analysis and to inform shared policies. The second objective
is to develop rules that can assist migrants, not least with respect to
pension portability, temporary work permits and basic rights. Migration
has always been the key driver of human progress and dynamism. In
the age of globalization, the rising barriers being erected to migrants
pose a threat to economic growth and the sustainability of our economies
and societies. Free migration, like totally free trade, remains a
utopian prospect, even though within regions such as Europe this has
proved workable. Greater attention needs to be given to the management
of migration. As John Stuart Mill argued, we need to ensure
that the real local and short-term social costs of migration do not
35.2% 42.9% 43.9%
17.1% 20.3% 22.4%
Mobile technology has radically changed the world over
the past decade, with mobile penetration soaring, impacting
banking, travel and many other key industries.
Keeping cities moving
So far, yet so near
in a USD 40-billion
users by region
THE INCREDIBLE RISE
OF MOBILE BANKING
The total number of users of mobile payments rose
by 55% between 2009 and 2010, to 109 million.
The greatest number of mobile payment users is found
in Asia Pacific, far ahead of any other region.
MOBILE PENETRATION ACROSS THE GLOBE
The number of mobile subscriptions per 100 people
increased by more than 60 between 2007 and
2012 in countries such as the Russian Federation,
Brazil, Saudi Arabia, Egypt, and Indonesia.
Change in mobile subscriptions per 100 people
in 2012 compared to 2007
> 60 40 – 60 2 0 – 40 < 2 0
Source: UN, World Bank
VOLUME IN 2012
The total volume of funds raised
through crowdfunding grew by
81% to reach USD 2.7 billion in 2012.
In million USD
10 MOST CONGESTED CITIES
Three Belgian cities rank among the
ten most congested European and
North American cities – a quite
unenviable track record. In the USA,
the two worst-affected cities are
Los Angeles and San Francisco. Only
commute trips made during peak
hours, during the week, were used to
compile this data.
Bilateral remittances estimates
for 2011 using migrant stocks,
host country incomes
and origin country incomes
in billion USD
the last 12 months
BRUSSELS Belgium 85.4
LONDON United Kingdom 81.7
ANTWERP Belgium 76.7
ROTTERDAM Netherlands 65.1
LOS ANGELES USA 62.8
PARIS France 60.0
STUTTGART Germany 59.9
COLOGNE Germany 56.8
GHENT Belgium 54.8
SAN FRANCISCO USA 53.5
FLOWS OF INTERNATIONAL
Nearly a quarter of the total international
remittances sent stem from
the USA, while India and China are by
far the largest remittance-receiving
Middle East and Africa
GLOBAL INVESTOR 2.13 — 20 More and more of the world’s people are living in (sub-)urban settings.
This is stretching many mass transport systems to the breaking point.
Sustainable transport expert Dario Hidalgo says governments need to rethink
public transport, focusing on quality, safety and integration.
INTERVIEW by Richard Hall
GLOBAL INVESTOR 2.13 — 21
marked BRT (bus rapid transit)
lanes connect the city’s mass
rapid transit stations, ensur -
ing that there are practically
no delays in getting riders
to their destinations on time.
GLOBAL INVESTOR 2.13 — 22
Richard Hall: How did you get into
mass rapid transit (MRT) and bus rapid
Dario Hidalgo: After completing a PhD in
urban transport planning in 1997, I joined
Mayor Enrique Peñalosa’s team and worked
on planning the TransMilenio bus system
in Bogotá. The government had initially wanted
a metro, but it became clear that a BRT
network could be built more quickly and at
lower cost. It was part of a large-scale urban
transformation in my home city and was
an instant success. I have since been involved
in more than 20 projects worldwide –
including in cities in Mexico and others as
diverse as Lima, Accra, Istanbul and Indore.
The TransMilenio BRT project in Bogotá
has become quite famous. Why?
Dario Hidalgo: TransMilenio is a lowcost,
high-impact system. The first phase
(40 km) was completed in just three years
(1998–2000). It captured international attention
due to its high capacity – more than
40,000 passengers per hour, per direction –
and an innovative public-private partnership
model. The city builds the infrastructure, and
local entrepreneurs (currently seven groups
with nearly 2,000 buses) own and operate
Today the BRT is 106 km long and carries
more than two million passengers a day.
Its success helped mainstream the concept
worldwide. Our database www.brtdata.org
indicates that 150 cities have BRT and bus
corridors; 115 of these have been created
Dario Hidalgo has spent the last 24 years helping local
and national governments in Latin America, Asia and Africa
plan sustainable public transport systems. He publishes
regularly in academic journals and holds training courses
worldwide. Dr. Hidalgo is based at NGO EMBARQ’s
in Bogotá, Colombia.
Can you describe some of the typical pitfalls
you face when building a BRT network?
Dario Hidalgo: Experience around the
globe shows the great potential of BRT, but
planning, financing and organizational difficulties
should not be papered over. The important
thing is not to rush into implementation
until all the planning has been thought
through. Also, every city is unique, so copy/
paste doesn’t work. Most of the obstacles
are institutional rather than technical. Such
projects are inherently complex as they
involve aligning a baffling array of interests.
Strong political leadership and well-crafted
communications are essential. One of the
big advantages of BRT systems is that they
can frequently be realized within an elected
leader’s term of office.
A new report written by the Institute for
Transportation and Development Policy and
EMBARQ is titled “The Life and Death of
Urban Highways.” Your thoughts?
Dario Hidalgo: Traditionally, urban transport
planning has been all about moving
cars, not necessarily people. As a result,
most cities in the world have focused on
expanding road networks. The result has
been appalling. Clearly, creating more roads
does not solve congestion; it brings more
cars to the streets. It’s like trying to fight
obesity by expanding the size of our pants!
Several cities – Seoul, San Francisco,
Toronto, Vancouver – have actually begun
removing urban highways and replacing
them with public-transport infrastructure.
We urgently need to reallocate funding from
urban parking and highways to sustainable
Where are you currently involved in BRT
projects? How important is it to be on site?
Dario Hidalgo: We support sustainable
mobility and urban development initiatives
in Mexico, Brazil, Peru, Turkey, India and
China. We also work with researchers from
Chile, USA, Portugal and Australia via the
ALC-BRT Centre of Excellence (www.brt.cl),
and support 30 Latin American transit
agencies in their quest for quality and
integration (www.sibrtonline.org). On-site
meetings are particularly important when
it comes to convincing decision makers.
Where are the biggest BRT projects today?
Dario Hidalgo: The construction of a
150 km BRT network in Rio de Janeiro in
preparation for the FIFA World Cup and
2016 Summer Olympics, and the expansion
of Metrobús in Mexico City from 95 to 200 km
are two notable examples. The introduction
of BRT in Mumbai and Bangalore may be
among the most challenging, and capacity
enhancements in the saturated corridors of
Bogotá and Istanbul will certainly be major
undertakings. We expect around 30 cities
to introduce BRT
primarily in Asia – but also, in the near
How is MRT/BRT changing mobility
patterns in both the
developed and developing world?
Dario Hidalgo: We have observed a
cultural shift in Europe and, increasingly,
the USA. People used to aspire to live in a
house in the suburbs and commute. Today,
more and more people want to live in the
city itself – in denser, mixed-use areas.
We don’t know how this trend will evolve in
“Urban transport planning
has been all about moving cars,
not necessarily people.”
GLOBAL INVESTOR 2.13 — 23
1 Bogotá A combination of pedestrian crossings,
footbridges, cycle paths, roads and bus
lanes ensures that commuters and other
travelers can reach their destinations safely and
efficiently, regardless of the mode they opt for.
2 Guangzhou China’s bike-sharing
programs are the biggest in the world.
As in Hangzhou, there will also be well over
100,000 bicycles provided for public
sharing programs in Guangzhou by 2020.
Photo: Institute for Transportation & Development Policy
the developing world, but mass transit planning
provides an excellent opportunity to
influence the future shape of cities. Places
such as Copenhagen, Curitiba and Singapore
show how successful strategies that
dovetail land use and transport planning
can be. We must adapt these models to fit
the needs of rapidly emerging economies.
This needs to happen fast before car-centric
urban sprawl takes root. Interestingly,
the Chinese cities of Wuhan and Hangzhou
have set up the two largest bike-sharing
programs in the world (90,000 and 60,000
bicycles, respectively). Hangzhou plans to
expand to 175,000 bikes by 2020. It’s a
revolution on two wheels! China now also
leads the world in metro systems, with
Beijing and Shanghai already surpassing
London as the longest networks.
Public transport usage is very high in
Latin America. In US cities, it accounts for
just 3%–4% of urban trips. How do
you see this evolving?
Dario Hidalgo: Transit ridership is growing
rapidly in the USA. More people are
choosing urban lifestyles. In the major urban
centers a culture of membership rather
than ownership is emerging thanks to
social networks and car-sharing programs.
In Latin America, on the other hand, we see
the opposite trend: a growing middle class
is now able to own more cars and motorcycles,
and public transport usage is declining
in most cities. The key in Latin America is
to improve service and safety, which may
require subsidies, and to introduce congestion
charging and parking management
How do you see the future of MRT/BRT as
cities expand and technology develops?
Dario Hidalgo: Some of the key innovations
are in vehicle technology. Trains are
are catching up with cleaner propulsion
technologies such as natural gas and hybrid
electric. The overarching goal must be to
create multimodal, integrated public-transport
networks with “last mile” connectivity
to onward transit services as well as car and
bike sharing. Mobile user interfaces, which
are improving all the time as smartphone
penetration rises, play an increasingly
important role here. Smart ticketing systems,
including electronic purses, are likewise
becoming available on mobile devices. I see
these technologies being further integrated
innovation turning everything on its head.
Can you describe your most unusual
Dario Hidalgo: Crossing the Bosporus
Strait and jumping on and off the fast and
frequent Istanbul Metrobüs; gliding through
The Strip in Las Vegas on a shiny golden
bus-cum-tram; and rattling through hectic
and historic Mexico City in a hybrid bus.
My most surreal experience was sharing
a train carriage with 700-plus people in
Mumbai, which has the world’s highest
GLOBAL INVESTOR 2.13 — 24
yet so near
As mobile technologies increasingly facilitate Internet access from anywhere
and at any time, a new economy is arising. It is not only reshaping the
way people interact, work and learn, but also increasing productivity – bringing
people, processes, data and things closer to build a smarter world.
TEXT Uwe Neumann, Senior Equity Analyst, Credit Suisse
In the 1990s, the PC was the “go-to” device to access the
Internet. Not anymore. The rising penetration of mobile
phones has placed the Internet in our pockets (mobile Internet).
According to Ericsson’s mobility report, total global
smartphone subscriptions hit the one-trillion mark in 2012,
and will reach 4.5 trillion by the end of 2018, covering more
than 60% of the world’s population. Making use of this immense
potential means exploring new ways of communicating
– possibly redefining the concept of mobility altogether.
The next step is connecting people, processes, data and
things. Cisco calls this the “Internet of Everything” and predicts
that things connected to the Internet will surge from
10 trillion to 50 trillion by 2020, essentially creating many
new networks. This will likely reshape the way people work,
interact and learn. It can, in turn, be capitalized on by companies
globally through improving productivity, accessibility
and visibility. Imagine that a medical procedure is not conducted
in a doctor’s office anymore, but that a patient waiting
for a check-up receives a scanner in the form of a pill
delivered to the home. The pill is then swallowed and the
information is automatically transferred to the treating doctor
over the Internet. Here, for the patient, mobility means not
having to travel while still receiving a service. According to
Cisco, USD 2.5 trillion of value over the next ten years will
likely be generated globally through higher labor efficiencies
and improving collaboration. Technology trends, such as cloud
and mobile computing, virtualization, Big Data and increased
processing power, are driving this “Internet of Everything”
economy. Given the huge opportunities of the market environment,
CIOs worldwide have become more attuned to the
mobile-first technologies, and are increasingly noting the
critical importance of a mobility strategy to remain competitive
A mobility strategy ticks several boxes. One major box is
enabling employees to better collaborate and use the exponential
power of networks. Metcalfe’s Law – named after the
founder of network equipment company 3Com, Robert Metcalfe
– states that the value of a network increases proportionately
to the square of the number of users. This means
that people not only simply use the network, e.g. a virtual
Internet meeting, to gain information about a company’s initiatives,
but that a “network effect” can also be achieved,
allowing people to quickly find the person best suited to
provide advice/services for customers or process development.
Other examples are virtual research and development
teams, which increase the mobility of knowledge. Mobile
virtual collaboration teams are enhancing and managing creativity,
increasing knowledge-sharing, adding cultural aspects
and improving organizational performance. However,
this is not limited to large firms or the office workspace in
general. Smaller companies (SMEs) can now gain access to
information, education and advice from experts in highly
specialized fields transcending geographic boundaries. Virtual
platforms enable finding specialized employees easily
and even find temps for one-off tasks, without having to
provide a workspace. Some SMEs can even take shape in a
virtual mobile Internet world, where like-minded people work
together on a project without ever meeting in person. On a
private basis, shared painting applications offer an opportunity
to participate in a painting project where various painters
GLOBAL INVESTOR 2.13 — 25
from around the world work on a single picture. While this
does not (yet) replace meeting in person, it enables people
to acquaint themselves with their counterparts and to lay the
foundation for relationships.
Another box that a successful firm’s mobility strategy
needs to tick is the ability to share large digital files and
provide intelligent digital work platforms to bridge the physical
gap and share both work and ideas immediately on a
global basis. Tele- and video-conferencing solutions should
be accessible from a variety of mobile devices. According to
IT research firm IDC, one interesting trend is the use of more
web-based software solutions, such as Microsoft Lync, over
traditional ones that require special hardware in cases such
as video-conferencing. In this context, two IT infrastructure
trends support the increasing use of software-defined mobility
solutions. First there is the already well-known Bring Your
Own Device (BYOD) trend. It enables an employee to stay
connected with family and friends, while also with the company’s
network by using their own mobile devices. Second
is the Bring Your Own Application (BYOA) trend whereby
employees can use cloud-based applications from external
providers and the corporate network at the same time on
their own devices. For example, a single department of a
firm could decide to use a meeting application, such as
CloudOn, GoToMeeting or Asana, downloaded from an external
provider to arrange or attend meetings virtually, share
files or collaborate on projects. This could turn out to be
Collaboration, video, mobility drive value in the IoE economy
In the Internet of Everything (IoE), there continues to be exponential
increase in the connectivity between people, processes, data and things. By
2020, the number of such connections is predicted to grow from 10 trillion
to 50 trillion. Cisco foresees that an incredible USD 14.4 trillion will be at
stake in the new IoE economy, as the ever-changing capabilities of collaboration,
video and mobility will facilitate the sharing of insights and data
while cutting costs, accelerating innovation and reducing time to market.
USD 6.4 tn
USD 3.5 tn
USD 4.5 tn
Uwe Neumann, CEFA, joined Credit Suisse Private
Banking in 2000 as an equity analyst responsible
for the telecom and technology sector. He has
28 years of experience in the securities and banking
business, including 18 years in research. He holds
a Master in Economics from the University of
much more efficient compared to the company’s own collaboration
tools, which may not be specialized enough for
the department’s own purposes. In addition, employees can
even create their own applications, which they can use or
share with others over the companies’ communication networks.
However, these initiatives on the part of companies
to encourage employees to take advantage of a highly connected
virtual world require investments in IT infrastructure.
Companies are thus setting up cloud-based and virtualized
IT infrastructures that make their operating systems independent
of the hardware.
But there is also a flip side. The BYOD and BYOA
business practices also leave companies vulnerable to
cybercrime. With the proliferation of data communication in
the virtual world, the number of cyberattacks is increasing
exponentially. According to a United Nations report, more
than USD 1 trillion was lost in cyberspace in 2008 due to
online fraud, identity theft and loss of intellectual property
globally. In addition, demand for privacy is rising, as not
only can people’s online activities be tracked and monitored,
but also their offline ones as a result of location
signals from mobile devices.
Swifter data processing, greater efficiency, independency
of location, instant information retrieval and cost reductions
are all benefits waiting to be reaped and are likely
to outweigh the risks and disadvantages. The new opportunities
allow us to become smarter in everything that we are
doing together – from receiving medical care to developing
ideas and realizing their benefits – be it in a virtual space or
face-to-face in the real world when we move beyond the
GLOBAL INVESTOR 2.13 — 26
Where brick-and-mortar retail banking
doesn’t exist, smartphone technology
and other modern systems are enabling
those in emerging economies to access
mobile financial services.
Photo: BFG Images
GLOBAL INVESTOR 2.13 — 27
in a USD 40-billion
Countless millions in poorer regions of the world depend on the cash transfers that
migrant family members remit from abroad. But accessing those payments and obtaining
other vital financial services have not always been easy. The situation is beginning
to change, as banks and telecom operators are now establishing partnerships.
TEXT Christine Schmid, Head of Global Financials Research, and Javier Lodeiro, Equity Research Analyst, Credit Suisse
Migrants transferring remittances to their home countries have an
important economic impact on many developing economies. As large
sums are transferred through informal channels, the exact figure is
USD 406 billion
was sent home by migrants to developing countries in 2012, representing
roughly the combined 2012 gross domestic product (GDP)
to developing countries will grow to USD 534 billion by 2015. On
average, each of the 231 million migrants sends USD 1,800 to her or
his family per year. This cash flow is critical as many of these payments
are made to poorer parts of the world population that struggle
to make up for money shortfalls, especially in times of economic
turbulence. As such, remittances exhibit a countercyclical behavior
and contribute to reducing poverty. Often excluded from traditional
forms of banking, the beneficiaries rely on such payments for their
consumption of daily goods or financing projects. These days, classic
remittances are supported by new service models and technological
development, which thus helps to support economic growth.
Owing to the increasing adoption of smartphones worldwide, and
with Internet data traffic growing at high double-digit rates, traditional
forms of banking such as branching and ATMs (automated
teller machines) are no longer sufficient. As a result of modern technology,
new companies are entering this line of services with an increasingly
bright future. Modern forms of banking can supplement
remittances and diversify a country’s financing needs.
Over the last 15 years, growth in remittances has been fastest in
Asia and the Pacific, followed by Africa, while the slowest growth has
occurred in the Middle East. The graph on page 28 shows remittance
growth in selected countries, highlighting a stable growth pattern. In
total, the 2008 financial crisis had no significant impact on remit-
10% of GDP in many
countries, such as the Philippines, Bangladesh and Haiti.
Today’s remittance service providers at risk
Given the dependence on remittances in some countries, public awareness
is focusing on the transaction costs of remittances. Accord-
USD 40 billion of funds remitted annually. In some countries, remittance
fees can exceed 15% (e.g. in Japan it is 18%). The estimated annual
remittance fees of USD 40 billion are a sizeable amount considering
that in particular it is migrant families with modest backgrounds
who rely on them. To maximize the impact of remittances on local
economies, the G8 embarked on the “5x5” objective in 2009, aimed
at reducing the cost of remittances by 5% p.a. within five years. >
GLOBAL INVESTOR 2.13 — 28
TWO SUCCESSFUL FINANCIAL SERVICES MODELS
This company is active in offering a peer-to-peer social
network in the USA that brings borrowers and investors
together online and leaves the banks out of the picture.
Lending Club checks the borrower’s request for a loan,
based on the information submitted, and assigns the loan
with respective interest payments if approved. The investors
buy “Notes” which represent a portion of a loan.
The company earns money by collecting small fees from
both the borrower (one-time processing fee) and investors
(service fee). For the low 10% of applications that are
successfully granted a loan (thus implying a focus
on creditworthy borrowers), the result is lower rates
and quicker processing, while lenders obtain higher
rates. As such, investors have earned an average net
annualized return of over 9.5% since 2007.
A highly successful example of how to succeed in a developing
country with mobile money technology is Kenya’s
M-PESA, which is used by 40% of the country’s adult population.
The number of domestic transactions now exceeds
Western Union’s transactions worldwide, making up 17%
of Kenya’s GDP in 2011. The system is based on an idea
from Vodafone whose affiliate Safaricom cooperated with
the Central Bank of Kenya and successfully recognized the
ability of mobile phones to lower the costs of transactions
for poor people. Without even visiting a bank, customers
are able to deposit cash, exchange it for electronic value
at retail outlets such as gas stations, and withdraw or use
it for payments if desired. The company has capitalized
on strong latent demand for domestic remittances, a lack
of different systems and competition, transparent pricing,
a supportive banking regulator and its presence in rural
areas, thereby quickly establishing a critical mass of
customers. Crucially, these customers gained trust in the
system very quickly due to the advanced technology of
the company Rackspace, which used a satellite streaming
strategy and experienced professionals to enable security,
constant real-time transaction data and 24-hour customer
support. M-PESA’s ability to make every transaction
profitable distinguishes it from banks that often struggle
to make money from small-value customers, without
engaging in business relationships with them.
Growth of remittances in selected countries Remittances from migrant family members abroad to those living in emerging countries have seen a steady increase
over the last two decades. This rate accelerated, in some cases significantly, as we entered the new millennium. Remittances to Nigeria increased ninefold between 2004 and 2009,
surpassing the amounts sent home to those in Pakistan, Bangladesh and, briefly, the Philippines. Source: World Bank
Remittances of selected countries (USD bn)
Bangladesh Nigeria Pakistan Philippines
GLOBAL INVESTOR 2.13 — 29
Thus, the final savings in remittance fees over the five-year period
would exceed USD 9 billion by 2014.
costs have contracted by 9.8% since 2008 (and by 15.9% if special-
savings achieved are definitely positive for the receivers, the targets
have been missed so far, and more has to be done. As usual, competition
is a key driver for lowering transaction fees. Mobile banking
or modern banking models in general could reduce the transaction
costs of remittances. New models could also be used to underwrite
loans for projects and ultimately fund the economy using new technology
to circumvent the lack of traditional banks.
of mobile phones to capitalize on the “unbanked” population, reduce
costs and facilitate remittance payments, there are a few pitfalls that
need to be avoided. After all, mobile financial services do not have a
high penetration in all growth markets yet. In many emerging economies
such as Tanzania, Ghana and Kenya (see the box on M-PESA)
people have never done business with a bank, but are using mobile
financial services regularly. In countries such as Pakistan, Nigeria,
Argentina and India there is still considerable potential to improve the
use of mobile financial services. One difficulty lies in the fragmented
structure and lack of convergence in the mobile technology systems.
Other problems include the reluctance of banks to engage in partnerships
with telecom operators, the unregulated nature of the business,
network security, customer privacy, liability, fraud prevention and
standardization. Hence, governments need to assist by creating a
regulatory framework, and companies need to adapt their business
models to their customers.
Under these circumstances, it follows that traditional companies
offering financial services such as banks are only partially key to ac-
points in the right direction, a solo attempt by banks will not suffice
to minimize costs. Instead, mobile network operators with the technological
know-how to develop relevant services and systems should
contribute to increasing the use of mobile devices for transacting
remittances, and thus lower costs. Moreover, innovative attempts
by companies to build on their clients’ Internet presence in order to
evaluate their credit ratings help to generate additional sources of
loans in developing countries. This can be especially fruitful where a
large proportion of the population does not have access to banks and
loans, but are avid users of new technologies. Similarly, in the case
of developed markets, companies like Lending Club (see box) also
aim at reducing transaction costs by omitting an intermediary financial
institution. Last but not least, willingness among banks to engage in
partnerships with mobile operators as seen by the Kenyan company
M-PESA (see box) is also critical to ensuring the ongoing success of
Christine Schmid CFA, is Head of Global Financials
has covered Financials for 14 years and coordinates the
Javier Lodeiro CFA, FRM
insurance sector and US
details on our map
on page 18
Low Middle High
Inequality of economic
INEQUALITY OF ECONOMIC OPPORTUNITY
Countries with low inequality of economic opportunity, such
as Norway, are those that have a higher degree of intergen -
er ational or social mobility. Countries characterized by
greater inequality of economic opportunity, such as Brazil,
have a higher degree of income inequality.
Countries with low inequality of economic opportunity have
the highest social mobility. A rising number of university
graduates choose to emigrate, among them many scientists.
Moving ahead in Africa
HOW WELL-EDUCATED ARE YOUR IMMIGRANTS?
46.9 CANADA 23.7
CN US UK
38.4 USA 5.0
CA UK AU DE
The proportion of recent migrants to OECD countries holding
a university degree rose by 5 percentage points to 31% between
2000 and 2010. Luxembourg, Denmark and the Netherlands
benefited most from this trend. Among the native-born population
the proportion increased 4 percentage points to 29%.
University graduates as % of total, percentage-point change 2000–2010
–10 –5 0 5
10 15 20
TOP 10% VS. BOTTOM 10%
After taxes and transfers, the richest
10% of the population in OECD
countries earned 9.8 times the
income of the poorest 10% in 2010,
with the largest gaps recorded
in Mexico, Chile and the USA, and
the lowest in Denmark, Finland and
PE CO FR
7.1 BRAZIL 8.3
US CA DE
Switzerland has the highest percentage
of immigrant scientists. More
than half of its researchers are
non-Swiss, a large proportion being
German. On the other hand, a third
of the Swiss scientists emigrate,
with the USA and Germany being their
main destinations. On the other
extreme, Japan was the most insular
country surveyed, exchanging the
least scientific talent with the rest of
US UK DE
37.6 SWEDEN 13.9
US CA AU
32.9 UNITED KINGDOM 25.1
21.8 DENMARK 13.3
US UK DE
27.7 NETHERLANDS 26.4
FR US UK
18.2 BELGIUM 21.7
IT FR DE
US CH UK
23.2 GERMANY 23.3
56.7 SWITZERLAND 33.1
US UK CA
17.3 FRANCE 13.2
US DE UK FR
7.3 SPAIN 8.4
US UK FR DE
Source: IEEE Spectrum
ES DE FR
5.0 JAPAN 3.1
45.5 AUSTRALIA 18.3
5.3 5.4 5.6
10.8 10.7 10.7
GLOBAL INVESTOR 2.13 — 32
Education is often seen as playing a crucial role in improving social mobility and raising
incomes. However, these remain elusive goals in modern sub-Saharan Africa, which cannot yet
guarantee the supply of talent it needs to industrialize nor fully absorb the talent it produces.
Pedro Conceição reflects on the paradox of mobility and educational attainment in Africa.
TEXT Pedro Conceição, chief economist, regional bureau for Africa, United Nations Development Programme, New York
GLOBAL INVESTOR 2.13 — 33
Malawi Phoya, an author and blogger,
takes a few minutes out to relax in his
office in the center of the city in Blantyre.
GLOBAL INVESTOR 2.13 — 34
drop out of primary school.”
Giselle Weiss: Broadly speaking, how
would you characterize the educational
landscape across Africa?
Pedro Conceição: First off, it’s very
important to recognize the economic progress
that has been achieved across the
continent since the turn of the millennium.
From the mid-1970s until around 2000,
economic performance in Africa (and here
I mean sub-Saharan Africa) was terrible.
In fact, for many years, per capita growth
was actually negative. Along with the
resurgence in economic growth since about
2000, the share of people living on less
than a dollar a day has been going down,
quite rapidly. And education, too, has
been improving fast.
How do you measure that ?
Pedro Conceição: Around 1990, which
is the benchmark year for the Millennium
Development Goals (MDGs – something we
use a lot at the UN to measure progress),
about half of the population of school
age was not enrolled in either primary or
secondary school. The figure for enrollees
is now close to 80%. The MDG is to get
to 100% enrollment in primary education
by 2015. We are unlikely to meet that
target. But you can see that the progress
has been dramatic, especially in the
context of rapid population growth. That
creates huge pressure to increase educational
According to the UNDP’s Human Development
Index (HDI), sub-Saharan African
countries actually come out on top with
respect to speed (not level) of progress
based on indicators of income, education
and health. But you’ve also said Africa
is the most unequal region in the world.
Pedro Conceição: When we look at the
developmental challenges in Africa, we tend
to focus on extreme poverty. What is less
emphasized is the level of inequality in the
distribution not only of income, but also
education and health. In other words, a very
poor child in Africa is much less likely to
get to a school and to be healthy than a child
from even a middle-income family. That is
true everywhere, obviously, but it’s much
more accentuated in Africa. When we
adjust the HDI (which is just an average)
to account for inequality, Africa takes
the largest hit.
How does that affect social
mobility in everyday life?
Pedro Conceição: About 80% of the
people who are employed in Africa are
in what is called vulnerable employment.
They are working, but they are working
for their family, for their farm, for their own
consumption – activities that do not necessarily
pay a wage. If you break this down
between men and women, you find that
85% of women in Africa work in vulnerable
employment compared to 70% for men.
Moreover, the literacy rate for women is
about 65% compared to about 75% for men.
This is particularly troublesome because
we know that education of girls and women
is very effective in driving many developmental
A companion article to this interview states
that, in the industrialized West, education
is the single most important determinant of
an individual’s earnings prospects. Is that
also true of Africa?
Pedro Conceição: Things are changing a
little bit in parts of the developed world
now as a result of the financial crisis. But in
general, in a country like the USA, the
higher the level of education, the higher the
income and level of employment. In Africa
we actually don’t see that everywhere.
What we see in some countries – and here
statistics are very poor, and a challenge –
is that the higher the level of education, the
higher the level of unemployment.
Pedro Conceição: The structure of the
economy of those countries is not yet
able to fully absorb highly educated people.
Of course, it varies from place to place.
For example, in cities like Nairobi, where
you have a very sophisticated financial
sector emerging, and companies building
around information and communication
technology (ICT), you can indeed absorb
skilled workers. In fact, countries where
opportunities exist in natural gas and oil
have a dearth of the engineers, lawyers,
accountants and financial analysts they will
need to fully exploit these opportunities.
At the same time, two-thirds of the labor
force in Africa still live in rural areas.
Pedro Conceição: Yes, and there the
challenge is very different. Unlike Asia and
Latin America, Africa has not had a green
revolution. Agricultural productivity levels
are still very low.
The American economist Robert Reich
has asked, “If we had a strategy designed
to increase jobs and wages, what would
it look like?” How would you answer that
question for Africa in the context of mobility
and educational attainment ?
Pedro Conceição: I go back to this point
about agricultural productivity because the
Pedro Conceição is Chief Economist at the United Nations Development Programme’s
(UNDP) Regional Bureau for Africa. He previously served as Director of UNDP
Development Studies. He is a specialist in global public goods and on the economics
of technological innovation and development.
GLOBAL INVESTOR 2.13 — 35
details on our
on page 30
Photos: Dawin Meckel, Ostkreuz (2) / Michel Gounot, Godong, Corbis
benefits would increase farmers’ income,
reduce prices of food staples, and in crease
the purchasing power of people in both
rural and urban areas. This could trigger
demand for nonagricultural activities in
rural areas, which would be a stepping
stone toward industrialization. Africa has
been deindustrializing. So investing in
agricultural productivity is critical, as well
as removing barriers to entrepreneurship
and creating new business opportunities.
And making the most of the technological
opportunities that do exist, like ICT.
Among young people who do have
oppor tunities, to what extent have returns
on educational investment in Africa
been affected by brain drain?
Pedro Conceição: It’s a challenge. But
there are now efforts by some countries
to draw on the diaspora through remittances
and sometimes by endeavoring to
attract professionals in medicine or finance
or law to come home.
What are the opportunities for and barriers
to the mobility of talent, both within
and between African countries, and abroad?
Pedro Conceição: We are not yet there
at all. In fact, enhancing regional integration
in Africa is a big focus of attention. For
example, intra-African trade is very low –
below 10%. The figure for the European
Union is much higher – close to 70%. And
that is just for goods, which are much easier
to move than people. I was recently in
Maputo, in Mozambique, which is still one
of the poorest countries in the world, but it
is having a commodity boom in natural gas
and coal. Companies there need people
and skills that are not available. As a result,
workers are coming from outside the
continent, less so from other countries in
Africa. In general, moving around Africa
is difficult everywhere.
What are the challenges to creating
greater mobility through education?
Pedro Conceição: The key challenge is
to ensure that children master basic literacy
and numeracy skills. For this to happen, we
have to avoid children dropping out of
school. In Africa, two out of five students
drop out of primary school. We also have
to focus on the quality of the education
that is provided, not just in basic skills, but
also in agriculture and new technologies.
Could we come back to this issue
of Africa and industrialization?
Pedro Conceição: Africa is at an advantage
when it comes to industrialization
because salaries are very low. In fact, if
you look at labor costs alone, Africa could
compete with China, Bangladesh, and
many countries in East and Southeast
Asia. But industrial activities are being
squeezed between nonproductive agricultural
expansion and low-value-added
services. Moreover, the problem of indirect
costs – such as good roads and a stable
power supply – makes it very tough
for manufacturing to progress in Africa.
Yet it must progress to create the
high- or even decent-paying jobs that
it needs to move ahead.
1 Sokouraba, Burkina Faso
Open learning: an adult literacy class pays
close attention to their instructor.
2 Lilongwe, Malawi A doctor is at work
examining specimens under a microscope in
the parasitology lab at a local hospital.
The golden rule
Inequality lowers mobility. In "equal" countries like Denmark,
children`s prospects do not depend on their parents` standing.
In contrast, in the United Kingdom, high inequality
shapes opportunity at both ends of the income ladder.
Source: Miles Corak, in The Economics of Inequality, Poverty and Discrimination in the 21st Century (ABC-CLIO, 2013),
and Tom Hertz et al., B. E. Journal of Economic Analysis and Policy, vol. 7, pp. 1–46 (2007).
and child earnings
between parent and
child years of schooling
0.1 0.2 0.3 0.4 0.5 0.6
1_The vertical axis is the strength of the relationship between parent and child earnings: as you move from bottom to top, the lower the degree of
income mobility across the generations. 2_The horizontal axis is the strength of the tie between parent and child years of education (i.e. how much higher
a child’s education is for each extra year of parental education). As you move from left to right there is less education mobility across the generations.
GLOBAL INVESTOR 2.13 — 37
Education is the single most important determinant of an individual’s
earnings prospects, says Miles Corak, especially in this era of
increased globalization and technological change. Income gaps within
countries make a good start in life all the more important.
TEXT Miles Corak, economist, Graduate School of Public and International Affairs, University of Ottawa
In the USA and the United Kingdom, where income inequality was
the greatest among rich countries a generation ago, about 50% of
the earnings advantage of relatively well-to-do parents is passed on
to their children. The advantages of birth, or for that matter the disadvantages,
are similar in Italy and France, where the level of earnings
inequality is comparable, but much less in Finland, Norway and Denmark,
where labor market outcomes are not as polarized.
In this relative, intergenerational sense, earnings mobility is something
that citizens of all the rich countries value. It speaks for equality
of opportunity, and the notion that children can grow up to become
all that they can be. Talents and energies, not the happenstance of
birth, ultimately determine life prospects.
Systems play a major role too
between schooling levels across the generations is barely noticeable.
The OECD has gone so far as to state that “the United States is one
of only three OECD countries that on average spend less on students
from disadvantaged backgrounds than on other students.” Education
is the key to one’s earnings prospects. This is all the more true in an
era of increased globalization and technological change. Those with
the right skills have managed to ride this wave of change that has
affected all of the rich countries. As a result, income gaps have grown
within countries, making it all the more important for children to have
a good start in life. The best-educated parents have more resources
and incentives to invest in the future prospects of their children. But
where inequality has grown the most, education mobility is the lowest,
And while intergenerational earnings mobility is not the result of any
one public policy, cultural value or labor market institution, the nature
and quality of schooling certainly play a central role in offering both
an escalator to the top for those from disadvantaged backgrounds,
and a trampoline that preserves the status of the advantaged.
Affordable, high-quality and accessible schooling from the early
years onward is surely the most significant gateway to higher incomes
for children born to lower-income parents. But, at the same time, an
education system with early tracking, varying quality and selective
access preserves existing socioeconomic inequalities. It is no surprise
that earnings mobility across the generations varies to such a
significant degree across the OECD countries: these countries have
very different education systems that are associated with differences
in education mobility.
In the UK, a child with university-educated parents is virtually assured
not to be a high school dropout. Every extra year of parental
schooling is associated on average with six tenths of an extra year
for the child. But in Finland, Norway and Denmark, the association
Miles Corak is a full professor at the University of Ottawa, working on social
mobility, inequality and social policy in the rich countries. You can learn more
about his research at milescorak.com or on Twitter@MilesCorak.
GLOBAL INVESTOR 2.13 — 38
Collingwood Estate, in East London’s Whitechapel
district. It has a distinctly multi
home to many new immigrants and asylum seekers.
Photo: Stuart Franklin/Magnum Photos
GLOBAL INVESTOR 2.13 — 39
Around the world, nations are only too aware of the strategic importance of labor
mobility, as well as its benefits and the obstacles to achieving it. Reliance
on migrants, both skilled and unskilled, is a complex proposition in the context of
fragile domestic economies, no matter how sensible it seems. Martina Lubyová
reviews some of the major policy trends in managing migration and their implications.
TEXT Martina Lubyová, director, Institute of Forecasting, Slovak Academy of Sciences, Bratislava
Immigration policies run in cycles. In the 19th century and early 20th
century, the USA generally encouraged immigration, not least to
settle the West and to build the railroads, but became more selective
after 1920. Similarly, during the UK’s period of rapid expansion during
the 1950s and 1960s, New Commonwealth immigrants from metal
workers to doctors could enter and stay in the country at will until the
Commonwealth Immigrants Act of 1962 ushered in an era of ever
greater restriction. Today, as labor becomes increasingly mobile, most
national immigration policies are geared toward managing migrant
flows with the primary goal of securing economic growth.
The OECD’s International Migration Outlook 2013 observes that,
in recent years, migration policies have tended to follow broader labor
market (and, to a lesser extent, demographic) objectives. Since the
1990s, policies on both sides of the Atlantic have been tested by
economic booms and busts, new patterns of movement, post-9/11
concerns about terrorism and recently the Arab Spring. Many countries
are currently in the process of fundamentally revising immigration
legislation in response to these developments.
When a domestic population is aging, declining or inactive – here,
the European Union, the USA and Russia are prominent examples –
bringing in foreign workers provides much-needed hands. Governments
everywhere aspire in particular to attract skilled labor to enhance
productivity. Two major policies employed by governments to
attract skilled labor are points-based systems and quotas. For example,
a special skilled-worker visa program created in 1990 called
H-1B is credited with fueling the information technology boom in the
USA. The flip side of government strategizing is the needs and ambitions
of individuals. Naturally, mass migration flows are also a perpetual
feature of armed conflicts and humanitarian crises worldwide.
But, according to the UN Population Fund, fueled by globalization,
economic migrants are the world’s fastest-growing group of migrants.
Policies track the labor market
of the recession, with a tendency toward greater stringency. In Australia,
Canada and the UK, for example, recruitment procedures for skilled
migrants have been made more selective. The UK especially, where
net migration (the difference between immigration and emigration)
peaked in 2010 at 252,000, has increased funds requirements for all
migrants and restricted work placements and permit duration for students.
In the USA, an effort to overhaul the country’s immigration
rules – including cutting red tape for employers and easing the path
to citizenship for America’s 11 million undocumented immigrants – has,
of this writing, stalled in the House of Representatives.
To address issues related to the EU’s labor shortages and aging
population, in 2009 the European Parliament passed the so-called
Blue Card Directive, which aims to fast-track and harmonize the
procurement of work permits for highly skilled non-EU citizens. Neither
a points-based nor a quota system, Blue Cards are contracts
of limited duration, though they can be extended. Not all EU states
have implemented the Directive, though those that have include Germany,
the Slovak Republic and Hungary, which are all moving to >
continued on page 42
GLOBAL INVESTOR 2.13 — 40
Home may be where the heart is,
but for one family it’s a long way
from where the work is
Photos: Patrick Zachmann/Magnum Photos
GLOBAL INVESTOR 2.13 — 41
The divided family Zhu Qi Yong and his wife Wang
Gui Qin are migrant workers living in the poor area of
Pudong in Shanghai – 1,850 kilometers separate them
from their children, who live with their grandparents in
their native village Xin Zhou Zen in Guizhou Province.
To provide for their family, they cook in their tiny
apartment for other migrant workers laboring on big
construction sites. They deliver the meals directly to
the construction site. Their two sons, seven-year-old Zhu
Hai Xing and five-year-old Zhu Hai Nan, see their
parents just once a year when they return home for two
weeks during the Chinese Spring Festival.
GLOBAL INVESTOR 2.13 — 42
immi gration policies
are geared toward
goal of securing
attract new skilled migrants. Indeed, the German government announced
in July 2013 that it had already issued 8,879 cards.
Not all migration takes place between nations. Especially in large,
emerging market countries where the level of local development
dictates job opportunities and needs, policies reflect the efforts of
governments to direct the flow of labor from region to region. In
China, for example, the “hukou” (household registration) system persists
as a means of pumping low-cost rural labor into the country’s
booming urban economies. However, securing the social rights of
migrant workers and their integration remains a challenge. Ongoing
talk of reform has as of yet produced no concrete results. In India,
the Mahatma Gandhi National Rural Employment Guarantee Act,
passed in 2005, is intended in part to stem “distress” migration to
cities by promising 100 days of minimum wage employment to a third
of India’s rural households.
legal residence and working status, it does not provide access to
social benefits or insurance.
Owing to the dire state of their economies, countries such as Spain,
Greece and Portugal have reduced their budgets for measures aimed
at promoting labor market integration of migrants. At the same time,
in 2011 and 2012, Spain enacted new measures aimed at providing
vocational training to the unemployed who had lost their benefits, not
explicitly for, but including migrants. Greece lowered the number of
proof-of-work days required for permit renewal from 200 to 120 per
year, and extended voting rights to migrants. In the face of a continuing
weak labor market, Portugal’s new National Integration Plan
promotes rights and training for immigrants.
In 2011, Denmark reversed its decade-long trend toward stricter
immigration laws. Among other things, the government eased family
reunification rules. Moreover, changes to the Immigration Act of 1999
now entitle immigrants to social assistance from the moment they
arrive in Denmark, and discourage residential segregation. An initiative
titled “We Need Everyone,” rolled out in 2012, targets immigrants
struggling to find a job due to personal or social problems.
Today, migration policies are a tool for addressing the economic
and social challenges of the globalizing world. Developed countries
attract migrants to boost economic growth or to mitigate the consequences
of population aging and decline. Developing countries
that cannot generate sufficient job opportunities use emigration as
a valve for excess labor or as a source of remittances. While today
migration policies are primarily governed by immediate economic
concerns, their long-term consequences will mainly concern the
social sphere. Successful integration of foreign populations and
building inclusive multicultural societies should thus be a priority of
Mitigating social pressures relating to migration
Whatever its impulse or manifestation, labor migration entails benefits
as well as costs for the receiving and sending countries (see the
article by Ian Goldin in this issue). As a result, the national migration
policies of developed countries are often governed by their integration
agendas. Although these agendas differ, the Scandinavian countries
represent one distinct group that generally offers open, publicly supported
and relatively generous schemes aimed at integrating foreign
residents into their societies. The United Kingdom, the Netherlands,
Japan and the USA, in contrast, opt for more restrictive schemes
characterized by limited migrant entitlements and a shift of the costs
and responsibility for integration to migrants themselves.
So, too, does Russia, whose economy depends on migrant workers.
Most immigrants come from the former Soviet republics, which
have a visa-free travel regime with the Russian Federation. Yet the
majority of immigrants must have a work permit, for which there is a
quota. Many migrants thus end up in the shadow economy. In 2010
the Russian authorities introduced so-called patents for illegal migrant
workers who work for private households, primarily as gardeners,
drivers, cooks and housemaids. While the purchase of a patent grants
is Director of the Institute of Forecast-
and Associated Fellow at CERGE-EI in Prague. She
com pleted her PhD at CERGE-EI in 2002 and worked at
the International Labor Organization’s Sub-regional
and Central Asia. She is a co-author of the OECD’s
International Migration Outlook 2013.
GLOBAL INVESTOR 2.13 — 43
n-Friedrichshain, the new S-n-Ostkreuz
concourse. To cater for the growing number of
upgrading its current infrastructure.
75% 50–75% 0–50%
Percentage of population living in urban
areas exceeding 100,000 people
2030 — AN URBAN WORLD?
By 2030, 92% of French, 91% of Brazilians
and 87% of Americans will live in urban
areas. The corresponding figures in China
and India will only reach 62% and 40%
Global mobility will continue to rise in the coming decades,
creating millions of jobs and generating more air passenger
traffic. More people will also move to urban areas.
New mobility models needed
How ideas spread
EMPLOYMENT GROWTH IN THE T&T SECTOR
The global travel and tourism (T&T) sector today employs nearly
100 million people, representing 3% of all employment. When
indirect jobs are taken into account, the industry contributes to
around 1 in 11 jobs. These figures are likely to rise further, with
approximately 66 million direct jobs set to be created worldwide
by 2022, with Asia benefiting most.
332M URBAN POPULATION
USA = 1,139 KM
Regional contribution of the global travel and tourism sector’s total
employment growth between 2012 and 2022, in thousands of jobs
Countries forecast to have
the most developed high-speed
train lines in 2025
HIGH-SPEED TRAIN LINES
China, Japan and Spain have the
densest high-speed rail networks in use
today – lines where trains can travel
at more than 250 kilometers per hour.
In 2025, the number of high-speed lines
is forecast to have more than doubled
worldwide to 51,677 kilometers.
Source: Oxford Economics
Worldwide high-speed train lines in 2013,
IN OPERATION = 21,365 km
UNDER CONSTRUCTION = 13,964 km
PLANNED = 16,347 km
FORECAST TO BE OPERATIONAL IN
2025 = 51,677 km
EVOLUTION OF AIR PASSENGER TRAFFIC FLOWS BETWEEN MAJOR DESTINATIONS
World air passenger traffic is forecast to annually grow by 5% between 2011 and 2031, with the greatest
increase in air passenger flows to take place within South Asia, as well as between South Asia and Southeast
Asia during these two decades.
Source: ICAST, India
PORTUGAL = 1,006 KM
SPAIN = 5,525 KM
FRANCE = 5,200 KM
GERMANY = 2,257 KM
ITALY = 1,318 KM
SOUTH ASIAN FLOW
in South Asia 524%
from Southeast Asia 417%
from Europe 320%
from Middle East 306%
SOUTHEAST ASIAN FLOW
in Southeast Asia 334%
from China 281%
from Africa 285%
MIDDLE EAST FLOW
from Africa 285%
SOUTH AMERICAN FLOW
in South America 280%
SWEDEN = 750 KM
TURKEY = 2,805 KM
in China 281%
905M URBAN POPULATION
JAPAN = 3,622 KM
CHINA = 22,619 KM
590M URBAN POPULATION
INTERNATIONAL TOURISM BY REGION OF DESTINATION
In 2012, international tourist arrivals exceeded the 1-billion mark globally
for the first time ever, up from 940 million in 2010. Europe will remain the most
visited region over the next decades, though Asia Pacific will be catching up.
International tourist arrivals received (in million)
475.3 744 41.1 %
GLOBAL INVESTOR 2.13 — 46
The appeal of cities is unstoppable, and half the world’s population now lives in urban surroundings.
Traffic in some cities regularly slows to a crawl, while noise and air pollution reduce the quality
of life. With more and more people crowding themselves into a limited space, existing road and
rail links are impeding the expansion of capacities. The situation calls for new solutions.
TEXT Thomas Rühl, Head of Swiss Regional Research, and Andrea Schnell, Research Analyst, Credit Suisse
GLOBAL INVESTOR 2.13 — 47
Developing into an industrial center has transformed Shenzhen
into China’s most densely populated city. The number of private cars
has risen from 1 million to 2.25 million in the last six years alone.
According to the IBM Commuter Pain Index, only Mexico City is less
commuter-friendly. The young Asian metropolis is a good example of
the main problem currently afflicting large cities: jobs in the services
sector are primarily being created in the center and at transportation
hubs, while housing is largely provided in the surrounding agglomeration.
The capacities of the transportation infrastructure are unable
to keep pace with the enormous growth of the population and commuter
numbers so that traffic congestion and delays are the order of
the day. Alongside the urban sprawl an “urban crawl” is emerging as
commuters and goods move at a snail’s pace.
Cities as melting pots of ideas and places for the efficient exchange
of knowledge are thus forfeiting their economic strength, while emissions,
air pollution, noise and accidents reduce the quality of life of
the inhabitants. Time losses throw a monkey wrench into the works
of cities and impede economic growth. According to Texas A & M, the
average commuter in Washington D.C. loses 67 hours a year sitting
in traffic jams, with corresponding setbacks in terms of recreation,
consumption and working time. Few cities were laid out for major growth
at the outset. New York City is an exception: the Commissioner’s Plan
of 1811 gave Manhattan its characteristic street pattern – the visionary
basis for subsequent growth. Cities with medieval structures – such
as the large European cities – were never planned for any similar type
of growth. Capacity expansions are considerably more difficult owing
to the lack of space.
The “smart” city
The example of Masdar City in Abu Dhabi is an attempt to plan a
climate-neutral and mobility-enhanced city in the open countryside.
As well as the revolutionary supply of energy from renewable sources,
the city was originally planned to be completely car-free. Mobility was
to be ensured largely through public transportation. However, the
introduction of personal driverless “podcars” has now been dismissed
and replaced by electric vehicles. This way, the different mobility needs
of the 50,000 or so planned inhabitants and around 60,000 additional
commuters are to be met. The approach adopted by Masdar
City serves to illustrate both the possibilities and technical and financial
limitations of mobility planning.
The ideal planned city has a secure, reliable, low-emission and
comfortable transportation system for passengers and goods, offering
maximum efficiency. Infrastructure and land use planning need
to be designed in a manner that enables the city to grow further
without resulting in congestion. Most global metropolises are confronted
with significantly more complex challenges than Masdar City:
major adjustments to the transportation networks are impossible or
enormously expensive. The most promising enhancement options are
described in the adjacent boxes.
Road to the smart city is a bumpy one
Investments in transportation systems have extremely long-term returns.
The risks of opting for the wrong technology are illustrated by
examples such as the failed “future technology” of monorail. Various
cities such as Sydney and Seattle introduced this technology, but
owing to the high investment costs, monorail has been unable
to achieve major success as a mass means of transportation. Different
incentives for governments, businesses and the scientific >
NEW AVENUES: A MOVE IN THE RIGHT DIRECTION
TRAFFIC REDUCTION WITH INCENTIVES
AND TECHNICAL SOLUTIONS
Modern ICT solutions allow people to work anywhere.
Home offices and decentralized, company-independent
shared desks in residential areas help reduce commuting.
For production enterprises, the campus model offers
homes for employees close to the production sites.
TECHNICAL MOBILITY MANAGEMENT
Adaptive control elements (traffic lights, speed limit signs,
lane signs, adaptive public transportation connections
and information apps for passengers, e.g. Hot Stop.com)
can enhance the capacity and reliability of existing road,
bus and rail links. Commuters should be able to plan
in detail the best possible modal split of transportation
means (car, train, bike, foot) depending on the current
traffic situation. Indicators at bus stops and on mobile
phones enable travelers to react to delays and connection
breakdowns. The Future Urban Mobility Project in
Singapore, an example of an integrated mobility management
project being implemented in cooperation with
the Massachusetts Institute of Technology, is based on realtime
data and a profound understanding of traffic flows.
ECONOMIC MOBILITY MANAGEMENT
The road pricing system in Singapore and carpool lanes
are successful examples of incentive mechanisms to make
roads more efficient for all users. The sharing economy
trend has fostered the emergence of new business models
such as the Mobility car-sharing system in Switzerland,
Barclays Cycle Hire in London and Zimride in San
Francisco. Real-time ridesharing or taxi-sharing based on
mobile phone apps transforms private mobility into
ad hoc public transport models. Data about disruption
is shared by users with other road users via apps such as
The latest developments in IT, sensor and communication
technology mean that new solutions may soon become
reality: interacting vehicles can form “trains” over longer
distances, thereby making road traffic more efficient
and environmentally friendly. Another step is the driverless
car (e.g. from Google) that allows the driver to
sleep or work during the journey. As the vehicle parks by
itself, parking spaces can be some distance from the
user’s destination, thereby significantly enhancing the
flexibility of cities in terms of spatial planning.
NEW PUBLIC TRANSPORTATION SYSTEMS
The efficiency of trains can be massively enhanced if they
no longer have to stop. Priestmangoode design consultancy
in London proposes a system that allows trams to be
connected to the side of non-stop high-speed trains and
thereby simultaneously combine the role of platform and
local distribution. Further ideas are innovative rail systems
such as the proposed Hyperloop between Los Angeles and
San Francisco, a linear-induction-powered train-in-a-tube.
GLOBAL INVESTOR 2.13 — 48
community are exacerbating the problem of selecting a technology.
Furthermore, the Google driverless car serves to exemplify the innovation-hampering
impact of regulations and insurance issues:
California had to carry out legal changes prior to the first road test.
The legal consequences in the event of an accident have not been
clarified: Is it the passenger who is liable or the car manufacturer?
We therefore think that innovative technologies will prevail more among
users (smart vehicles) than among infrastructures (smart roads).
Since the origins of civilization, cities have decisively shaped history.
Mobility and the exchange of ideas are the crucial benefits of cities
and key to the competition for attracting businesses. Cities that
tackle the “urban crawl” will thrive. Those unable to adapt their mobil-
Andrea Schnell joined Credit Suisse in 2012 as an economist focusing
on the Swiss economy, particularly locational quality and public
Thomas Rühl joined Credit Suisse in 2005 as an economist responsible
and tax competition, he has been a consultant for several Swiss can-
Ring Roads of the World
The graphic on the left is a
composite image consisting
of stacked layers, all in the
same scale, representing
the ring roads surrounding
some 27 international cities.
Houston, Texas, has the
largest such system, with
Beijing, China, coming in
at number two. This awardwinning
image, titled Ring
Roads of the World, was
originally created by the
Rice School of Architecture,
located in Houston, Texas.
Source: Thumb Projects
Illustration: Thumb/New York, originally for Rice University School of Architecture
GLOBAL INVESTOR 2.13 — 49
The American dream of seamless commutes, suburbia and big cars
has turned into something of a nightmare for many. Architect Eric Höweler
contemplates a radically different model for the USA’s Northeast Corridor.
INTERVIEW by Richard Hall
Richard Hall: How did the
“Shareway 2030” project take shape?
Eric Höweler: Some auto manufacturers
are realizing that streetscapes
are being transformed to deprioritize
the car and they want to understand
the wider urban context better. So
Audi’s research team asked six archi -
tecture firms to submit “visions” for
the future of urban mobility. We chose
to pitch a remake of the Boston-to-
Washington (BosWash) megaregion
envisioned by Jean Gottmann in his
1961 book, “Mega lopolis.”
What exactly is BosWash?
Eric Höweler: At the heart of
BosWash is the notion that many cities
in the USA are no longer discrete
entities; one metropolitan area often
spills over into the next. The megalopolis
1960s futurists imagined for the
year 2000 is now a reality. Within the
BosWash region, which is now home
to over 53 million people and generates
one-third of the nation’s GDP,
America developed a number of (sub-)
urban prototypes – cul-de-sacs, strip
malls, drive-thrus – which have been
exported all over the globe. These
experiments are no longer sustainable.
So we tried to reimagine mobility
and collective consumption patterns
in such a megaregion in 2030.
So, it’s an alternative
Eric Höweler: In a way, it is.
Car ownership and the wider narrative
of freedom and social mobility are
certainly intertwined in the USA.
As architects, though, we tried to conceive
of urban mobility in its widest
sense. The Shareway encompasses
housing and suburbs, the train/plane/
car/bike interface, “last-mile”
strategies, house sharing and urban
How would the transport
component of Shareway work ?
Eric Höweler: The core consists
of a bundled transit system connecting
public and individual transport to a
single artery running along the
400-mile stretch of Interstate 95.
The Shareway is a network of hubs
and pathways (including a high-speed
train running above the I-95) in
which people and cargo would travel
along a “stacked” route. Bundling
allows passengers to switch between
the different transport modes and local
and national transit. To help reduce air
traffic in BosWash and accommodate
larger planes and cargo ships, the
Shareway would link the high-speed
transport network to a multilevel
“Superhub” in Newark.
What other innovations
does Shareway propose?
Eric Höweler: In addition to these
mobility scenarios, we imagined a
“Sharestay” time-share system for
houses where you only pay for the
time you actually spend in a building.
And we experimented with urban
agriculture schemes (“Farmshare”)
and an innovative rotating road
surface (“Tripanel”) that would flip
between city street, park and energy
source. Shareway ultimately aims to
replace isolated, unimodal commutes
and inefficient, dispersed infrastructures
in the BosWash region with
a tightly meshed transport ecosystem
orchestrated by smart software and
social media. In this world, access –
switching and sharing – would matter
more than ownership.
Eric Höweler is a registered architect,
architectural writer and co-founder of Höweler
+ Yoon Architecture LLP, an interdisciplinary
Assistant Professor at Harvard University’s
GLOBAL INVESTOR 2.13 — 50
Giselle Weiss: Your early research is associated
with the wildly popular idea of six
degrees of separation, which far predates
you. How did that idea spread?
Duncan Watts: I don’t know. But the
notion that we are all connected through
a short chain of acquaintances has been
around for a long time. It shows up in
a 1929 short story called “Chains” by the
Hungarian poet Frigyes Karinthy. And
the urbanist Jane Jacobs speculated about
it in her famous book, “The Death and
Life of Great American Cities.”
They didn’t call it six degrees
of separation, though.
Duncan Watts: No. That label comes
from the title of a Broadway play of the
1990s by John Guare. The actual history is
a little involved. But in any event, in 1967
psychologist Stanley Milgram set out to test
the idea by having people in Boston deliver
letters to people (“targets”) in Omaha,
Nebraska, through the intermediary of
others known only on a first-name basis.
He found that the average length of the
letter chains that reached the targets was
six. He called it the small world problem.
Every human advance, and what we call culture, relies on the
human capacity to embrace new ideas en masse. But how does that
happen? How does an idea become so compelling that it is worth
sharing? More important, how is it that ideas come to be adopted?
Duncan Watts has made a career of studying how ideas spread.
INTERVIEW by Giselle Weiss
do spread quite
a lot … but they
are very rare,
one in a million
Where did your research come in?
Duncan Watts: In the 1990s, I was
studying synchronization among crickets –
who chirps with whom. Then one day
on the phone, my dad asked me whether
I’d ever heard of the idea that everyone
is only six handshakes away from the
president of the United States. It occurred
to me that both problems involved networks,
and that interested me.
What makes the idea so powerful?
Duncan Watts: We’re attracted to
the Enlightenment idea of ourselves as
independent individuals who decide
what we want to do and go out and do it.
But the reality is that we’re very much
enmeshed in social relations. Everything
we do and care about involves other
people. These are network concepts.
Recently, you’ve been working on the
structure of viral diffusion, for example,
of tweets on Twitter. What’s that about ?
Duncan Watts: We’ve been mapping
the spread of information, particularly
online. When you think about how information
spreads, it’s natural to liken it
to the spread of a disease. In fact, people
have been doing that for a long time
in marketing. And it’s been popularized
in recent years by people like Malcolm
Gladwell, author of “The Tipping Point,”
who very explicitly draws the analogy
between the spread of behaviors or beliefs
That sounds reasonable.
Duncan Watts: At a certain level,
it is. But it’s tempting to go a step further
and apply the same mathematical models
that have been developed to understand
the spread of a disease to the spread
of ideas or products.
What’s wrong with that?
Duncan Watts: There are all sorts
of models of how things spread, and they’re
often incompatible with each other. Moreover,
we have very little data to test any
of these models. For example, if you want
to trace the spread of an idea, you have
to be able to observe that person A has that
idea, and then that person tells B, and then
person B has the idea, and now person B
tells person C. Mapping this out in a population
of millions of people with hundreds of
thousands and millions of things to observe
is a tremendously difficult process.
So how do you approach it ?
Duncan Watts: We’ve done a lot of work
using Twitter data – news, media, images –
GLOBAL INVESTOR 2.13 — 51
where we can, to some approximation,
observe everything. And we can also track
exactly where everything is at a given point.
People who study diffusion are generally
looking for a critical threshold where ideas
go from not spreading to spreading like
And what have you found?
Duncan Watts: Initially, we found that
nothing really spreads like that. In a study of
millions of observations, 99% of everything
that happened, every “adoption” of an
idea, was within one degree of the source.
Which is almost the opposite of spreading.
In other words, I tweet something and
you re-tweet it. Your followers see your
re-tweet, but they don’t do anything.
It’s the re-tweet that we pay attention to.
When we described this result to our
colleagues, however, they often didn’t like it.
Duncan Watts: People are convinced
that certain things “go viral,” and that’s what
interests them. So they would say, “We
know some things spread. Look at ‘Gangnam
Style’ or the use of Hotmail or Facebook.
Maybe you didn’t see anything
spread, but you must only have looked at
things that weren’t any good.” So then we
did a second study where we really looked
at everything on Twitter – a billion observations
– for an entire year. And sure enough,
we found that some things do spread
quite a lot. But they are very rare, one in
a million events. And even they don’t
look like “social epidemics.”
Why not? Surely “Gangnam Style”
is a social epidemic?
Duncan Watts: Epidemic models
assume that ideas become popular by viral
word of mouth. But in the media world,
information can also spread because some
major channel or site picks it up – it gets
on the front page of Yahoo! or the “New
York Times” or whatever – and a million people
or a hundred million people see it. And
a bunch of them re-tweet it. That would still
be popular, but we wouldn’t say it had
spread virally. So when something becomes
popular, is it a “broadcast” or is it “viral”?
Intuitively, you might guess one or the
other. But when we looked, we found tremendous
diversity: some popular things
are pure broadcasts, and some display
pure viral spreading. We also found about
every conceivable mixture of the two.
There’s no typical way in which things
“This is not
about cat videos
going viral –
it’s about changing
minds, and their
Duncan Watts is a principal researcher at Microsoft
Research NYC and an A. D. White Professor-at-Large
at Cornell University. From 2000 to 2007, he was
at Columbia University, then at Yahoo! Research.
He is the author of “Everything is Obvious (Once You
Know the Answer): How Common Sense Fails Us”
Duncan Watts: Unlike diseases, where
in general you only have one thing spreading
at a time, in ideas, it’s always a contest.
Everything that’s spreading on ing
for oxygen with everything else that’s
spreading on Twitter. It’s hard to be exposed
to one particular idea because there’s just
so much other stuff to pay attention to.
Occasionally something is able to rise above
the noise, and everybody hears about it and
pays attention to it. But that is extraordinarily
rare and somewhat arbitrary. If you’re a
social media strategist or a digital advertising
agency, basing a marketing or other
strategy on triggering a social epidemic is
probably not the best use of your resources.
You are also investigating the nature of
cooperation between people. How is that
related to the spread of ideas?
Duncan Watts: The spread of information
and the spread of cooperation are both
examples of social influence, so they’re
related, at least in principle. But it’s also important
to understand that different types of
influence are likely to spread in different
ways. Me persuading you to change your
political views is very different from me persuading
you to click on a video.
Duncan Watts: People do not easily
adopt ideas that involve changing their conception
of themselves. Not accepting the
idea of climate change might be tied up
with your political ideology, your suspicion
of government and your dislike of elite
intellectual types. When is an idea something
that you can adopt just because it’s
obviously right or obviously interesting?
And when is it something that is going
it’s tied up with all these other things?
What are the stakes?
Duncan Watts: This is not about cat
videos going viral, even if sometimes that’s
what we study because it’s what we have
the most data about. Really, it’s about
changing people’s minds, and their behavior;
and one way or another, everyone –
governments, corporations, marketers, policymakers
– is in the business of trying to
change people’s minds. Understanding how
that happens is one of the big questions
of social science. It’s frustrating that we’ve
been thinking about this for so long and
have very little in the way of concrete answers.
But maybe this particular period of
GLOBAL INVESTOR 2.13 — 52
Comparison of Chinese travelers who travel
abroad for business and for leisure
Comparison of Chinese travelers who travel independently and those
who travel as part of arranged groups, according to hoteliers
of guests travel
travel as part
Sources of information that Chinese travelers use, and rely on most
27 % 4 % 2 % 16 %
Rely on most
Travel magazines / brochures
Promotions / deals
42 % 6 % 8 %
46 % 11 % 15 %
Online accommodation / travel websites
Online review sites
50 % 12 % 16 %
60 % 15 % 11 %
GLOBAL INVESTOR 2.13 — 53
TRAVEL AND TOURISM
Thanks to more relaxed government restrictions on foreign travel and the rise
of the Chinese middle class, with higher disposable incomes, Chinese outbound
tourism is enjoying remarkable growth despite the economic slowdown
of recent months. A survey by Hotels.com highlights current trends.
TEXT Scott Booker, president, Hotels.com
According to the China Tourism Academy, China became the world’s
largest outbound tourism market in 2012, overtaking Germany and
the USA, with an estimated 83 million overseas trips made by Chinese
citizens. That number is estimated to rise to 200 million by 2020. Earlier
this year, the Chinese government published its Outline for National
Tourism and Leisure, which, among other topics, is aimed at
sparking an increase in outbound tourism by encouraging employers
to promote the use of leave days and also to give Chinese workers
more freedom and flexibility of where and when to travel.
Presently, most outbound travel from China originates in the three
major cities, Shanghai, Beijing and Guangzhou. China plans to build
70 new airports by 2015 and to expand its existing 100 airports. Lowcost
carrier activity and route expansion in Asia continues to increase,
many with China as a key part of their future networking planning. Air
Asia, Scoot by Singapore Airlines, Jetstar, Peach by ANA, Cebu Pacific
and others are all helping to build Chinese inbound and outbound
flows. Several airlines have also announced new non-stop long-haul
services to China beginning in 2013. In 2012, we carried out our firstever
Chinese International Travel Monitor (CITM), examining the impact
of the huge growth in Chinese outbound tourism and the response
by the global hotel industry to benefit from this rapidly
developing trend. The 2013 CITM (http://press.hotels.com/citm/) is
richer in data than last year’s, as we also surveyed 3,000 international
travelers from China to gain a better understanding of the consumer’s
viewpoint. The results point to some interesting trends.
Governments paving the way
Many governments around the world are helping to invigorate the market
by relaxing visa requirements. The China 2020 Strategic Plan is
a core element in the Australian 10-year tourism strategy. Chinese
visitors to European countries participating in the Schengen agreement
only need to have a visa from one of the countries in order to
be able to visit all 26 members comprising 22 EU countries and 4 from
the European Free Trade Association. The UK has pledged to review
the visa application process for Chinese tourists by seeking a joint application
for the UK and Schengen countries.
Tourist boards are funding aggressive marketing campaigns. For
example, VisitBerlin aims to position Berlin as the most important new
Gateway to Central Europe in the Chinese market and to double the
visitor numbers in two years. Mexico expects to boost the number of
Chinese travelers visiting the country in 2013 by 30%, helped by a
relaxation in visa restrictions. Russia Tourism Year, with more than 200
events staged in China in 2012, prompted 343,000 Chinese tourists
to visit the country that year, a 47% increase over the previous year.
Bucking the group trend
China’s international travelers are still among the wealthier of China’s
citizens, with an average yearly household income of RMB 109,922
(USD 17,752) compared with the Chinese average of RMB 49,920
per year. However, nearly a quarter of travelers have household incomes
of less than RMB 70,000 per year. Nearly all of the Chinese
international travelers surveyed have been abroad for leisure reasons,
while over half have visited other countries for business or educational
purposes. In a growing trend, nearly two-thirds of Chinese travelers
say they prefer to travel independently and not as part of a group. This
development has also been confirmed by hoteliers. Overall, 61% of
hotels say they have seen an increase in the number of independent
Chinese travelers in the past two years. This figure rises to 74% in
the Asia-Pacific region, 69% in Latin America and 62% in North
America, but falls to 46% in Europe. Independent travelers are also >
GLOBAL INVESTOR 2.13 — 54
Scott Booker is President of Hotels.com, a leading online
accommodation booking website that started as a telephone
2002. There are now more than 85 Hotels.com sites worldwide.
Hotels.com is part of the Expedia group.
younger and equally likely to be male or female. Many will have already
studied abroad, and thus are more familiar with how to fit comfortably
into a foreign environment. These travelers tend to avoid travel
agents for advice, preferring to use online travel, accommodation and
review websites. They also consult a wider range of information
sources before booking. Social media play a much higher role in their
decision-making process. When it comes to accommodation choices,
independent travelers’ decisions are more widespread: three-star hotels
followed by four-star, with 10% plumping for five-star properties;
but hostels and back-packing establishments and B&Bs are also significant.
As with Chinese travelers as a whole, sightseeing, dining and
shopping are still the most popular activities when traveling internationally.
Nonetheless, cultural attractions such as the theater, concerts,
comedy shows are slightly more appealing to this group.
Knowing the customer
Nearly six out of ten travelers state that the ability to accept Chinese
payment methods is the single most important offering from international
hotels. With a bias among wealthier travelers, most respondents
choose language-related items, such as translated literature, website,
TV programs and newspapers, as among the more important services
a hotel can provide. Also on the wish list, in decreasing order of importance,
are more Mandarin-speaking staff, on-site restaurants serving
Chinese food, Chinese breakfast and Chinese room service.
Many countries now recognize the potential of the Chinese traveler
boom. The UN World Tourism Organization has reported that Chinese
travelers spent USD 102 billion on international tourism in 2012,
40% more than in 2011, overtaking Germany and the USA as the
world’s biggest spenders. This remarkable growth in travel in Chinese
outbound tourism, largely due to more relaxed government restrictions
on foreign travel and the rise of the Chinese middle class with higher
disposable income, does not appear to have been impacted by the
slowdown in overall economic growth seen in China over recent
months. The desire to explore foreign lands and enjoy new experi-
The wish list
Interested in far away lands, but staying closer to home The top ten
destinations Chinese travelers want to travel to compared to the destinations they
actually travel to, based on hotel bookings. Source: Hotels.com
Top spenders in international tourism: China jumps to first place. In the
last three years, China has vaulted past both Germany and the USA in terms of international
tourism expenditure. Source:
BIG SPENDERS ON HOTELS
Consistently among the big spenders on hotels Countries where Chinese
travelers are among the top spenders on accommodation Source: Hotels.com
GLOBAL INVESTOR 2.13 — 55
Hotel des Bergues in 2005, it now caters to the global business and diplomatic community.
INTERVIEW by Giselle Weiss
Giselle Weiss: What is the single
biggest change you’ve observed in
the hotel industry in recent times?
José Silva: We are historically a
business hotel. Today, people combine
work and pleasure. It’s no longer
just a matter of going to the gym.
Sightseeing used to be something
leisure guests did. Now you have
a business partner booking an hour
at a museum between meetings,
or going for a bike ride.
What explains the change?
José Silva: Technology has
transformed people’s business lives.
It is so in our face! We are always on
the phone, or dealing with e-mail or
checking company websites. Consequently,
work and play have merged.
Which nationalities stay at the hotel ?
José Silva: Geneva’s a bit different
from other areas of Switzerland.
So while we do see an uptick in clients
from emerging markets, at present
our base is still primarily Europeans
and North Americans, unlike Interlaken
or St. Moritz, which are more specialized.
We have 500 international
organizations here, which contributes
to a more global clientele.
And yet India and China each
have over a billion people. When
they start to travel more …
José Silva: … they will change the
nature of the hotel industry. Like
Americans changed the nature of the
hotel industry. You can get eggs
and bacon for breakfast now anywhere
around the world.
What are today’s guests looking for ?
José Silva: Personalization. It used
to be that what people wanted was
choice. So you’d offer a big breakfast
buffet. Now people expect you to
know their preferences, whether
that’s family activities or DVDs. Our
hotel has 115 rooms, and each room
is assigned one of our six personal
assistants who do nothing but
personalize the preferences of every
guest. That kind of service requires
A 2011 report by the IBM Institute for
Business Value, titled “The Personalization
Paradox,” cites the power
of social media as a source of information
about guests’ unique preferences,
but also the challenges it poses.
José Silva: People want personalization,
and value the effort we take
to know about them. But we are very
careful to use only information clients
have told us or made public elsewhere.
Is TripAdvisor complicating your life?
José Silva: TripAdvisor and
distribution channels have obviously
drastically changed the world. Instant
value-for-money comparisons can
be done at the tip of a finger. As a
hotelier, you can’t avoid it. And if you
are good at what you do, the increased
transparency pays off because
success is rewarded so much faster
than in the past, and sometimes
How would you sum up the
significance of mobility for the travel
and tourism industry ?
José Silva: Some people still see
traveling as a nice but expensive
thing to do. In fact, compared with
other human activities, traveling is not
so expensive. It has become part
of entertainment and culture, and it’s
here to stay. Traveling has become
a way of life, a basic need.
Four Seasons Hotel des Bergues Geneva.
He previously worked for Four Seasons
and beverages division, and later opened
a Four Seasons in Lisbon, Portugal,
before making the move to Switzerland.
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Credit Suisse Global Research
Thematic Research Analyst
Nikhil Gupta joined Credit Suisse Private Banking
in 2011, and is currently part of the thematic
research team. He has six years of experience,
research. He is a postgraduate from the Indian
School of Business, Hyderabad.
> Pages 8–9, 18–19, 30–31, 44–45
Senior Equity Analyst
CEFA, joined Credit Suisse Private Banking
in 2000 as an equity analyst responsible
for the telecom and technology sector. He has
28 years of experience in the securities and
banking business, including 18 years in
research. He holds a Master in Economics
from the University of Constance, Germany.
> Page 24–25
Credit Suisse AG, Investment Strategy & Research,
P.O. Box 300, CH-8070 Zurich
Nilanjan Das, Sara Carnazzi
21 October 2013
Markus Kleeb, Katharina Schlatter
Design and realization
Angélique Bolter, Claudia Veit, Maja Davé,
Sacha Steiner, Rahel Frick (project management)
Giselle Weiss, Dorothée Enskog, Richard Hall, Robin Scott
GDZ print, Zurich
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Cover photo: Mathias Hofstetter
Cover inside: Matteo Rinaldi / Gettyimages
Illustrations: Martin Mörck
No. 01-13-865170 – www.myclimate.org
© myclimate – The Climate Protection Partnership
Head of Global Financials Research
CFA, is Head of Global Financials within the
single security research unit. She has covered
14 years and coordinates the
in 1993 in accounting, and later portfolio
management. She holds a Master in Economics
from the University of Zurich.
> Page 26–29
Equity Research Analyst
CFA, FRM, joined Credit Suisse in 2010 as an
equity analyst responsible for the global insurance
sector and US banks. Javier has 18 years
of experience as a buy- and sell-side analyst.
He holds a Master in Economics from the University
> Page 26–29
Joined Credit Suisse in 2012 as an economist
focusing on the Swiss economy, particularly
she held positions in the public sector as
Swiss National Bank, and as a researcher at
ETH Zurich. She holds a Master of Science in
Business and Economics from the University
> Page 46–48
Head of Swiss Regional Research
Joined Credit Suisse in 2005 as an economist
providing Swiss economic analysis. He leads
the Swiss Regional Research team, focusing
systems, tax competition, regional business
consulting mandates for several Swiss cantons
and the Swiss Confederation. He holds a Master
in Economics from the University of Zurich.
> Page 46–48
Global Investor provides background analyses on current topics, as well as long-term
trends and their possible effects on financial markets and investments. Earlier editions
of Global Investor have addressed the following topics, among others:
You can order these research publications at www.credit-suisse.com/shop (Publication Shop).
Beside the above-mentioned issues, you can also order or download issues of Global Investor covering
other investment themes, as well as a wide range of interesting reports and handbooks.
Emotions and markets
Over coming decades, the
impact of megatrends on
global economic growth,
companies, and the stance
of policymakers and regulators
will be profound. We
are now focusing on the
massive forces of change
unleashed by the rise
of a multipolar world, by demographics
and by pressing
issues of sustain ability and
human powers of inventiveness.
This edition of Global
Investor explores how these
megatrends will play out,
where the opportunities lie
and which old certainties
could fall by the wayside.
and central banks took
drastic steps to stabilize
But there are risks arising
from government intervention,
such as the
balances in the developed
economies. Thus, investors
may face considerable
going forward. To restore
ative and global solutions.
A failure to do so could
result in a prolonged
period of economic –
and political – disorder.
In the advanced countries,
80% of the population
lives in urban centers.
Worldwide the share is
50%, and by 2050 it will
likely be two thirds. Cities
of all kinds will remain
the key locus of wealth
creation. Where wealth is
on the rise, the demand
for diverse consumer services
The drivers of successful
urbanization – from highquality
telecommunications to the
provision of innovative
cultural services – may
offer exciting opportunities
for astute investors.
by behavioral traits
that obstruct the cold logic
of rational investment
goals. Who can honestly
say they are as willing
to sell an asset at a loss as
they are to sell one at a
outlook is the same for
from collective panic
Academic studies have
sought to understand how
such behavioral factors
drive markets. Investment
professionals have used
these insights to try to
improve their judgments
about where the market
Global Investor 2.12, November 2012
Expert know-how for Credit Suisse investment clients
Global Investor 1.13, June 2013
Expert know-how for Credit Suisse investment clients
Entering the digital era
Taking a quantum leap
Bernardino Fantini It’s a long way from hand washing to the Human
Genome Project. Dr. Devi Shetty A visit with a cardiac surgeon who has
big ideas – and a bigger heart. S.Yunkap Kwankam
is just a phone call away. José Gómez-Márquez
Clever minds are hard
at work engineering better healthcare.
Michael Chui The race is on to capture value and gain insight – by looking for
the diamonds in the proverbial data haystack. Florian Michahelles Big Data
enables decision-making based purely on the data, not opinion or experience.
Her data-based cartography helps us to see and recognize
Jürgen g Galler
Big Data analytics is shaping
the future of almost every industry: Quo imus?
In the face of slowing
economic growth, inherited
wealth could regain some
of its former primacy.
The many facets of inheritance
range from assets
and institutions to the
passing on of ideas to
future generations. In the
latest edition of Credit
Suisse’s Global Investor,
a roster of expert authors
and Credit Suisse specialists
look at the effects
of inheritance on people,
society and economies.
Great design in business
goes beyond innovation
and marketing to create an
icon that sells itself.
Successful design can
turn a small company into
a big one, a struggling
second-ranker into a
dominant player. A few
designs are timeless.
certain Zeitgeist or stage
of technology. When
that passes, the company
may be weakened if it
cannot repeat the design
Across the vast universe
of modern global healthcare,
probably the single
most important driver of
change, with the greatest
potential for innovation, is
information and communication
range from using
genomics and computers
to simulate disease treatment
and outcomes, to
making patients partners
in their own healthcare,
to designing low-cost
medical tools in resourcepoor
Companies have always
needed to know their
customers, and doctors
have always needed to
know their patients. Big
Data provides a way for
them to do this on a scale
and speed that are vastly
larger and faster than
could ever have been conceived
in the past – and
that can detect previously
between diverse aspects
of people’s commercial,
medical and social lives.
Expert know-how for investors
a collection of Global Investor publications downloadable free of charge
in PDF format. The main articles are also available via podcast.
You can download all the Global Investor
editions since 2005 in PDF format.
See the Global Investor knowledge
website for animations and special features.
FACETS OF MOBILITY
TEXT by Richard Hall
Mobility means different things to different people,
but the topic invariably stirs strong emotions.
Being mobile is about much more than getting from
A to B; it ties into far-reaching trends – industrialization,
innovation, migration, wealth creation –
as well as deep-seated human experiences of
hope, ambition, progress and self-betterment. The
dream of mobility, in its broadest sense, is the
lifeblood of economies and a catalytic force in individual
biographies. This booklet showcases, in
vivid photographic form, some of the many facets
of mobility referenced in the main publication:
making the most with the least, off-piste entrepreneurial
thinking, finding ingenious solutions to
age-old problems, the rise and fall of cities, visions
of wearable technology, the quest for ever more
extreme pastimes, the limits of mass tourism in
emerging countries, shifting definitions of the
workplace, the future of hypermobility in the USA,
transience and permanence, the reshaping
of traditional rituals through technology and
the fantasy of instantaneous travel.
By the sweat of his brow
There is something impressive and simultaneously absurd about this Shanghai street scene
from French artist Alain Delorme’s “Totems” series. The teetering mass this worker is pulling has
intentionally been augmented using Photoshop – perhaps to emphasize the human cost of the
Chinese economic miracle? The diminutive profile of the individual against the soulless concrete
monoliths in the background highlights some of the complexities of mass rural-urban migration.
Onshoring tech talent – offshore
Visa restrictions can make it hard for foreign entrepreneurs seeking funding to operate in the USA. Blueseed intends
to solve this problem by creating a unique start-up community on a cruise ship off the coast of San Francisco,
in international waters. This scheme would potentially enable entrepreneurs from anywhere in the world to launch or
expand their business(es) a stone’s throw from Silicon Valley, but without the need for a US work visa. Blueseed
aims to convert the vessel into a co-working and co-living space equipped with high-speed Internet access and will offer
daily transportation to the mainland. So far, over 1,400 individuals from 68 countries have expressed interest in
living on Blueseed. Successful companies will receive advice on how to transition to Silicon Valley proper.
After fracturing his arm
and having to endure the
constraints of a heavy,
rigid plaster cast for several
months, Jake Evill, a recent
from Victoria University,
New Zealand, decided to explore
better ideas. The
result – the Cortex cast – is
a 3D-printed brace that
maps the contours of the
patient’s arm, but provides
support where the wrist
needs it. It also allows freer
movement of the thumb
and fingers. Though still at
the prototype stage, the plan
is to manufacture a product
that is not only flexible,
but lightweight, washable,
ventilated and recyclable.
Long a major port and center
of US automobile manufacturing,
Detroit has suffered
disproportionately from the
forces of deindustrialization
and global competition, losing
25% of its population between
2000 and 2010. In July 2013,
Detroit filed the largest
municipal bankruptcy case
in US history.
Google Glass, currently
still in the testing phase,
is the Internet giant’s first
foray into truly mobile,
many other things, the
smart specs respond to
voice commands and
allow you to share what
you see in real time.
They also display satnav
directions on a miniature
From hands-free to zero G
Virgin Galactic, part of Richard Branson’s Virgin Group, plans to offer suborbital spaceflight to individuals
willing to pay USD 250,000 plus a USD 20,000 deposit. Passengers will experience a brief period of weightlessness
on their journey to an altitude of over 62 miles. The first operational flights are scheduled for next year.
Keen to escape the searing
summer heat, thousands of
visitors pile into an artificialwave
pool at a tourist resort
in Daying County, Sichuan
Province, southwest China.
The saltwater attraction has
apparently been luring an
average of 12,000 guests a day
during the summer months
as temperatures broke the
40-degrees-Celsius mark. Extreme
overcrowding has forced
management to reinforce
safety procedures at the site.
Assuming participants have complementary needs,
office sharing can be an attractive option and
alleviate the isolation some freelancers associate
with working exclusively from home. It may also
be a pragmatic way to minimize rental costs
in desirable locations.
Billionaire investor and PayPal
founder Elon Musk has revealed
plans for a “Hyperloop”
transport system that could
one day shuttle passengers and
cars between Los Angeles
and San Francisco in aluminum
pods at up to 800 mph.
French artist Xavier Veilhan
is known for his highly
distinctive, site-specific creations,
often statues or
which he installs in cities,
parks and other spaces.
While many of his works are
about deconstructing or
redefining classical iconographies,
this series of giant
mobiles explores process:
movement, flux and the interface
between object and
abstraction. The installation’s
motions seem hypnotic
and repetitive, but can any
single sequence of dances
ever be repeated identically?
More and more Chinese newlyweds
are choosing to travel to
Europe to repeat their marriage
vows in landmark tourist
spots such as Neuschwanstein
Castle, Germany – one of
the most popular destinations.
Picture sources: Totem #7, 2009-2011 © Alain Delorme | Blueseed | Jake Evill Design | Yves Marchand & Romain Meffre | Frazer Harrison, Getty Images | Virgin Galactic |
Stringer China, Reuters | www.LouisRafael.com | Tesla Motors | © Veilhan / 2013, ProLitteris, Zurich | Michael Dalder, Reuters | Trevor Williams/Fiz-iks, Getty Images
The dream of be(am)ing there ... now
Star Trek popularized it, but the vision of instant “travel” (quantum teleportation or “beaming” in modern sci-fi
speak) has been around since time immemorial. Although the notion of zapping from one place to another without
passing through the space in between may seem ludicrous, this may be possible at the subatomic level where the
normal laws of motion do not apply. The idea is that minute particles can become “entangled” and that whatever
you do to one particle will instantaneously affect the other, irrespective of the distance between them. Rather than
traveling from point A to point B, information appears at point B and simultaneously disappears from point A.