New Mobility

Easing global gridlock Global Investor, 02/2013 Credit Suisse

Easing global gridlock
Global Investor, 02/2013
Credit Suisse


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Global Investor 2.13, November 2013

Expert know-how for Credit Suisse investment clients

New Mobility

Easing global gridlock

Fold out the handle, and

check in with Global Investor!

The briefcase handles are perforated,

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

new directions.

Important disclosures are found in the Disclosure appendix.

Credit Suisse does and seeks to do business with companies covered in its research

that could affect the objectivity of this report. Investors should consider this report as

only a single factor in making their investment decision. For a discussion of the risks of

investing in the securities mentioned in this report, please refer to the following Internet link:


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

New Mobility


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.


(Un)equal opportunity

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.


Managing migration

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

last year.

Disclaimer > Page 56

Podcast on www.credit-suisse.com/globalinvestor



The New


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

hot spot.

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.

“Physical separation

from family and friends will

always be an issue, but

modern telecommunications

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.


Chapter I



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?

page 10

The Silicon Valley advantage

page 13


Source: UN DESA






in millions, 2013



USA 45,785,090


GERMANY 9,845,244

SAUDI ARABIA 9,060,433



FRANCE 7,439,086

CANADA 7,284,069

AUSTRALIA 6,468,640

SPAIN 6,466,605




in millions, 2013



INDIA 14,179,627

MEXICO 13,201,181


CHINA 9,333,211

BANGLADESH 7,725,622

PAKISTAN 5,617,297

UKRAINE 5,552,689




Source: UN DESA




Cities with 1 million or more

foreign-born residents



The points on the map are the cities

attracting one in five of the world’s

immigrants. Combined, these

metropolitan areas have 37 million

foreign-born residents.



DUBAI United Arab Emirates



JIDDAH Saudi Arabia

LONDON United Kingdom






PARIS France

RIYADH Saudi Arabia



SYDNEY Australia






Population: 320,051,000

Immigrants: 45,785,090

14.3% of population

Migrant native countries

MEXICO 12,950,828

CHINA 2,246,840

INDIA 2,060,771


PUERTO RICO 1,685,015

VIETNAM 1,381,076

EL SALVADOR 1,371,767

CUBA 1,201,164







Source: MPI


Population: 63,136,000

Immigrants: 7,824,131

12.4% of population

Migrant native countries

INDIA 769,540

POLAND 687,444

PAKISTAN 405,878

IRELAND 360,263

CHINA 330,659

GERMANY 315,024




Population: 82,727,000

Immigrants: 9,845,244

11.9% of population

Migrant native countries

TURKEY 1,543,787

POLAND 1,146,754

RUSSIAN FED. 1,007,536


ITALY 433,127

ROMANIA 383,626

GREECE 238,220

CROATIA 233,064


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



40 %




30 %

20 %

10 %





0 %





Source: UN DESA


























Population: 28,829,000

Immigrants: 9,060,433

31.4% of population




Migrant native countries

INDIA 1,761,857

PAKISTAN 1,319,607

BANGLADESH 1,309,004

EGYPT 1,298,388


YEMEN 461,042


SUDAN 234,564




> 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


Population: 23,343,000

Immigrants: 6,468,640

27.7% of population

Migrant native countries



CHINA 447,407

INDIA 364,764

ITALY 231,650

VIETNAM 225,749








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


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 >


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.

“The European

Union is the world’s

largest experiment

with visa-free

labor migration.”

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

1918 –1919

Eastern Europe to

USA and Canada


Britain to Australia,

South Africa and

New Zealand

1939 –1940

Russia to Siberia


European Jews

to USA


Turkey to Germany


India, Pakistan and

Sri Lanka to UK


Mexico and

Central America

to USA

1950 –1960

North Africa

to France,

Spain and Italy

1950 –1960

West Indies to UK


Ugandan Asians to UK


Vietnam to Malaysia,

Australia and USA



The Silicon Valley


TEXT Vivek Wadhwa, VP of innovation and research, Singularity University, Mountain View, CA





Silicon Valley

New England

S. California

NY Metro

United Kingdom


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

Entrepreneurial Talent.”



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


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

linguistic barriers.


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.


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

business committees.


“The core role that

migrants play in

economic development

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

International migrant

stock as a percentage

of the nation’s overall





United Kingdom

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%



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.

Conflict migration

Source: Ian Goldin

2 million

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

Social migration

Economic migration

Student migration

Other reasons

2 million

5 million

3.5 million

2.5 million





35.2% 42.9% 43.9%

17.1% 20.3% 22.4%

Chapter II



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

page 20

So far, yet so near

page 24

Innovation welcome

in a USD 40-billion


page 26


Mobile payment

users by region




North America


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.



Source: KPMG


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

Latin America


> 60 40 – 60 2 0 – 40 < 2 0

Source: UN, World Bank




The total volume of funds raised

through crowdfunding grew by

81% to reach USD 2.7 billion in 2012.

In million USD

North America





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

South America


Source: Statista/massolution








the last 12 months

BRUSSELS Belgium 85.4

LONDON United Kingdom 81.7

ANTWERP Belgium 76.7

ROTTERDAM Netherlands 65.1


PARIS France 60.0

STUTTGART Germany 59.9

COLOGNE Germany 56.8

GHENT Belgium 54.8




Nearly a quarter of the total international

remittances sent stem from

the USA, while India and China are by

far the largest remittance-receiving


Source: WorldBank

Source: Inrix

Western Europe


















Total 46.4


Total 42.5



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


Guangzhou Specially

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.


Richard Hall: How did you get into

mass rapid transit (MRT) and bus rapid

transit (BRT)?

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

since 2000.

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

future, Africa.

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.”



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

MRT/BRT journeys?

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



So far,

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

in future.

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


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.

Source: Cisco


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

Constance, Germany.

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


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



Innovation welcome

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-

10% or

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. >





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






























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

opportunity index



Chapter III




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.

Source: IZA

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

page 32



page 36



page 38



46.9 CANADA 23.7


38.4 USA 5.0


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

Recent immigrants

Native born























–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















7.1 BRAZIL 8.3








Sources: Economist/OECD

Source: OECD






Amount of

immigrated scientists

Native scientists

going abroad

% %






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

the world.


37.6 SWEDEN 13.9






21.8 DENMARK 13.3






18.2 BELGIUM 21.7



23.2 GERMANY 23.3





17.3 FRANCE 13.2



7.3 SPAIN 8.4


ITALY 16.2

Source: IEEE Spectrum












5.0 JAPAN 3.1


45.5 AUSTRALIA 18.3








6.0 6.1

5.3 5.4 5.6





















10.8 10.7 10.7













ahead in


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


Malawi Phoya, an author and blogger,

takes a few minutes out to relax in his

office in the center of the city in Blantyre.


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.




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).




between parent

and child earnings



United Kingdom







New Zealand










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.





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,

Photo: iStockphoto

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.


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





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


Home may be where the heart is,

but for one family it’s a long way

from where the work is



1,850 KM




Photos: Patrick Zachmann/Magnum Photos



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.


“Most national

immi gration policies

are geared toward

managing migrant

goal of securing

economic growth.”

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.


Photo: Caro/Muhs/Keystone

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

Chapter IV




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%


Source: UNICEF

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

page 46

How ideas spread

page 50

The China

travel surge

page 52


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.








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


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 kilometers

IN OPERATION = 21,365 km


PLANNED = 16,347 km


2025 = 51,677 km

Source: UIC


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


SPAIN = 5,525 KM

FRANCE = 5,200 KM

GERMANY = 2,257 KM

ITALY = 1,318 KM


in South Asia 524%

from Southeast Asia 417%

from Europe 320%

from Middle East 306%


in Southeast Asia 334%

from China 281%

from Africa 285%


from Africa 285%


in South America 280%


TURKEY = 2,805 KM


in China 281%




























JAPAN = 3,622 KM

CHINA = 22,619 KM

















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)






2010 2030





7.4 %

8.2 %

149.7 248

13.7 %



29.6 %

475.3 744 41.1 %

Source: UNWTO







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


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 >




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.


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.


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.


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.


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

1 mile

Illustration: Thumb/New York, originally for Rice University School of Architecture




a megalopolis

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

American dream?

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


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.


How ideas


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

“Some things

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

and diseases.

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 –


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

become popular.

“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”

(Crown, 2011).

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.

How so?

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


Comparison of Chinese travelers who travel

abroad for business and for leisure


for leisure


for business

and education

Comparison of Chinese travelers who travel independently and those

who travel as part of arranged groups, according to hoteliers


of guests travel



of guests

travel as part

of arranged


Sources of information that Chinese travelers use, and rely on most


Social media

27 % 4 % 2 % 16 %

16 %

Loyalty schemes


Rely on most

Travel magazines / brochures

Promotions / deals

42 % 6 % 8 %

35 %

Travel agents


46 % 11 % 15 %

45 %

Online accommodation / travel websites

Online review sites

50 % 12 % 16 %

47 %


Travel guides

60 % 15 % 11 %

55 %

Source: Hotels.com/Pandodaily



The China

travel surge

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 >


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

The reality

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:




tourism expenditure

billion USD

2011 2012




Consistently among the big spenders on hotels Countries where Chinese

travelers are among the top spenders on accommodation Source: Hotels.com



Mixing business

and pleasure

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

careful observation.

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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Relative stock performance

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Absolute stock performance

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absolute performance of the individual stocks, generally on a 6–12 months horizon

based on the following criteria:






Absolute bond recommendations

The bond recommendations are based fundamentally on forecasts for total returns versus

the respective benchmark on a 3–6 month horizon and are defined as follows:





10% or greater increase in absolute share price

variation between –10% and +10% in absolute share price

10% or more decrease in absolute share price

In certain circumstances, internal and external regulations exclude certain

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Research coverage has been concluded.

Expectation that the bond issue will outperform its specified benchmark

Expectation that the bond issue will perform in line with the specified benchmark

Expectation that the bond issue will underperform its specified benchmark

In certain circumstances, internal and external regulations exclude certain

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Credit Suisse Global Research

Nikhil Gupta

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

Uwe Neumann

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


Giles Keating


Nilanjan Das, Sara Carnazzi

Editorial deadline

21 October 2013

Production management

Markus Kleeb, Katharina Schlatter



Design and realization


Angélique Bolter, Claudia Veit, Maja Davé,

Sacha Steiner, Rahel Frick (project management)

Editorial support


Giselle Weiss, Dorothée Enskog, Richard Hall, Robin Scott


GDZ print, Zurich

Copies of this publication may be ordered via your customer

advisor; employees contact Netshop directly. This publication

is available on the Internet at:


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International research support is provided by Credit Suisse’s

Cover photo: Mathias Hofstetter

Cover inside: Matteo Rinaldi / Gettyimages

Illustrations: Martin Mörck



Printed Matter

No. 01-13-865170 – www.myclimate.org

© myclimate – The Climate Protection Partnership

Christine Schmid

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

Javier Lodeiro

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

of Bern.

> Page 26–29

Andrea Schnell

Research Analyst

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

of Basel.

> Page 46–48

Thomas Rühl

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

Order GI

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.

GI 2.09

Global megatrends

GI 1.10

GI 2.10


GI 1.11

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.


crisis, governments

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

market volatility

going forward. To restore

stability, governments

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

steadily increases.

The drivers of successful

urbanization – from highquality

transport infrastructure

and modern

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

is going.

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

Big Data

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

How healthcare

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.

Katy Börner

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?

GI 2.11


GI 1.12


GI 2.12


GI 1.13

Big Data

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

technology. Examples

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

invisible connections

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.


Multipolar world




You can download all the Global Investor

editions since 2005 in PDF format.


See the Global Investor knowledge

website for animations and special features.

GIE 1545764



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.


the mold

After fracturing his arm

and having to endure the

constraints of a heavy,

rigid plaster cast for several

months, Jake Evill, a recent

architecture/design graduate

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.

Motor City


on empty

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,

head-mounted augmentedreality

devices. Among

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.


with the


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.

Making office

shares work

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.

Getting there


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.

Always on

the move

French artist Xavier Veilhan

is known for his highly

distinctive, site-specific creations,

often statues or

large-format sculptures,

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?

A mobile


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.

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