Global Megatrends

Global Investor 2.09, October 2009 

Expert know-how for Credit Suisse investment clients 

Global megatrends 

Prepare yourself for the future 

Rajendra K. Pachauri The need to cut carbon emissions will open up a new 

global market in green technologies. Zhouying Jin How to make the transition 

from “Made in China” to “Created in China”. Ray Kurzweil The acceleration 

of informatio n-based technologies should enable non-biological intelligence 

to match and even exceed human intelligence. Richard Watson We have the 

power to shape the future by looking at the present.

Listen to Global Investor at 

www.credit-suisse.com/globalinvestor

GLOBAL INVESTOR 2.09 Focus — 03 

Photo: Martin Stollenwerk 

Philipp Baretta 

Head of Global Investment 

Delivery 

Two-and-a-half millennia ago, the philosopher Heraclitus observed 

that “change is the only constant.” Yet within the turbulence and 

“white noise” of daily novelties, real trends take form and gradually 

become obvious and accepted – part of the furniture of our lives. 

Trends can be reinforced by copycat behavior, or shifted by embracing 

new discoveries. Major trends may be born by people simply 

behaving as they have always done, but in greater numbers. 

Climate change is a topical instance, with the Kyoto Protocol coming 

up for renegotiation in December. 

These big tectonic shifts can bundle together with millions of 

personal choices. We call such bundles “Megatrends.” The focus 

on sustainability and battling resource depletion through innovation 

is just one example. Megatrends can reinvent the world, causing 

crisis scenarios and creating vast opportunities simultaneously. We 

have been examining many of these trends in the Global Investor 

for over four years (see fold-out). Now, we draw them together into 

a single framework. 

Over coming decades, the impact of Megatrends on global economic 

growth, trade and capital flows, companies, and the stance 

of policymakers and regulators will be profound. Simply having a 

good sense of our destination will not be enough to achieve investment 

performance. Investors also need to understand the path of 

this journey, to navigate astutely and avoid bumps in the road. My 

own priority is ensuring that our clients travel there in the best possible 

vehicles, suited to the terrain and responsive to constantly 

changing conditions. Our aim is that the trend and the track are 

never lost, through any shifts in the investment climate. 

So, our research must constantly monitor and assess valuation, 

timing and deviations from the trends. Product incubation and management 

must pick the best products in terms of purity, liquidity, 

pricing and risk/reward features. The front organization must match 

the available products to the investors’ profiles and provide aftersales 

service, keeping the client fully briefed on how their investments 

are delivering exposure to markets and growth stories we 

have identified as critical. At Credit Suisse, we feel we are well po sitioned 

to provide you with this demanding and many-sided service. 

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 sustainability 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. Walter Benjamin wrote, “The Angel of History is 

ceaselessly blown into the future by the Storm of Progress.” As 

well as the excitement of glimpsing the future, readers will gain 

some storm-proofing by learning what the experts can already see 

on the horizon – and over the horizon beyond. 

 

The Global Investor received a BCP (Best of Corporate Publishing) award 

for fi nancial services communications in 2006, 2007, 2008 and 2009.


“We can actually 

invent a future 

we’re happy with” 

Best-selling author Richard Watson turns predictions 

on their head. He says we have the power to shape 

tomorrow by looking at the present and holding a 

meaningful conversation about where the risks and 

opportunities lie. 

Giselle Weiss, journalist 

Giselle Weiss: Trend researchers seem to be 

the prophets of our time. Do they actually 

know what the future will bring, or are they 

just very good salespeople? 

Richard Watson: I think a lot of them 

are very good salespeople. I’m more comfortable 

being referred to as a futurologist 

than a futurist or a trend researcher. Trend 

researchers tend to focus on the short 

term, whereas I do a lot of work that’s 10, 

15, 20 or 30 years out. That’s very different, 

although obviously the two are 

deeply linked. A lot of the time I’m extrapolating 

from current trends into the future. 

Futurology takes more of a systems approach, 

though. And it isn’t about making 

predictions per se. It’s really a tool for 

thinking. 

What do you mean by the term “trend”? 

Richard Watson: That question isn’t 

as easy to answer as it seems. It’s very 

important to distinguish between fads 

and trends. A fad is a pattern of attitudes 

or behaviors that is short lived or only 

involves a small number of people. A trend 

is a pattern of attitudes or behaviors, 

too, but it has more rigor and resilience. 

It could last decades as opposed to 

six months or a year. And trends are larger. 

For example, globalization is clearly a 

trend, whereas with the countermovement 

of localization, it’s hard to tell. It started 

out looking like a fad, but it’s now showing 

some longevity. I think there’s a great 

temptation to label something as a trend 

far too soon. Maybe Twitter will turn out to 

be a case in point. 

As you’ve said, trend research only analyzes 

developments that are already 

apparent in the present. How do you get 

from the present to the future? 

Richard Watson: Imagination and curiosity. 

You have to constantly be asking 

questions: How might things intersect ? 

Where could things go? In a way, it’s very 

speculative. A lot of what I do is extremely 

silly. But the more serious end of it is scenario 

planning, and futurology fits into that 

quite nicely. You should never believe a 

futurologist who says, “The future is X.” The 

future is by definition uncertain because it 

hasn’t happened yet. According to that 

logic, there must be multiple futures. Scenario 

planning is a wonderful strategic tool 

because it actually acknowledges the fact 

that there are multiple futures. It’s also 

a great way of helping people to think more 

deeply about what they’re doing right now. 

How do you make serious predictions out 

of speculations about the future? 

Richard Watson: Look, it’s not a science, 

it’s an art. By the same token, you 

are analyzing current trends for which data 

exist, which allows you to make some fairly 

reasonable and rigorous assumptions. 

And you can speculate about where things 

might go. Finally, there are checks you 

can do to see whether certain predictions 

look like they’re coming true. 

What are the limits of trend research? 

Richard Watson: What I don’t like about 

trends is that everyone follows them. The 

really interesting businesses – Apple is an 

obvious example – don’t follow trends at all. 

They are aware of trends. But they don’t 

slavishly follow them. They invent things 

that they think are good ideas and they sell 

them and find markets for them. I think 

that’s an extremely important point. 

Your book “Future Files” targets trends 

over the next 50 years. But this fall you’ve 

released an update, “Future Files 2,” 

which is already in the shops. What is the 

half-life of predictions by futurologists? 

Richard Watson: I started writing the 

first book in 2006 and finished it in 2007. 

So it’s kind of a bit early to be doing an 

update of a book about the next 50 years. 

But a lot has happened since then, and in 

fact I haven’t touched the original book 

at all. I’ve merely added a new preface, and 

at the conclusion of each chapter I take a 

look at what I got right and wrong. 

Why? 

Richard Watson: Because one of the 

risks of futurology is taking yourself and 

your predictions too seriously. I’ve done 

scenarios that required six months of work 

and generated reports that everyone loved, 

but that ultimately got filed away with corporate 

identity guidelines never to be seen 

again. The world is changing all the time. 

You’ve constantly got to be revisiting 

trends, scenarios and strategies, to see 

whether anything needs altering in the light 

of what’s just happened or what’s 

emerging. 

The stock market, too, tries to anticipate 

the future prices of shares. Can trend 

research help investors to bet on the right 

horse? 

Richard Watson: Yes and no. I wouldn’t 

necessarily make any bets on individual 

companies. It comes back to the question 

of whether you can really predict anything – 

you can’t. But sometimes you can discern 

a broad outline of the future. I like to think 

of it as sitting on a beach and looking out 

to sea. You can see waves form from a

Building investment strategies 

Giles Keating, Credit Suisse Head of Global Research 

Combining art and science 

In today’s unprecedented market conditions, building a robust investment 

strategy is more important than ever. Initially, individual objectives 

and constraints need to be identified, which involve both scientific 

factors, such as fixed liabilities, and more artistic elements, such as 

attitude to risk. After that come the design and implementation of an 

investment program – the stages discussed in this article – and these 

again involve both scientific and artistic elements. Here, we look at 

the general theory and practice of these investment processes, rather 

than focusing specifically on what happens at Credit Suisse. 

Michael O’Sullivan, Lars Kalbreier, Credit Suisse Research 

Getting the timing right 

While the financial crisis dominates the headlines, an understanding of 

how asset classes and investment styles perform over different stages 

in the economic cycle can help limit the damage to a portfolio wrought 

by a severe downturn. Specifically, judging when a slowdown becomes 

a contraction and when contraction mutates into recovery will help 

investors choose the appropriate allocation among asset classes such 

as bonds, equities or commodities. 

Thorsten Hens, Director Swiss Banking Institute, University of Zurich 

Risk management in times of crisis 

For style investing to pay off fully, investors generally need to stick to 

their plans and resist psychological pressure to change track radically 

as a result of unexpected events. However, in major financial crises, 

such as the one we are experiencing now, it can be hard to resist running 

with the herd and make heavy losses. A risk management regime 

that factors in market psychology can help to protect investors against 

the full effects of a market collapse, as the latest behavioral finance 

research shows. 

GI 1.09 

Return to a multipolar world 

Javier Santiso, Chief Economist of the OECD Development Centre 

Rebalancing global wealth 

A shift in the distribution of global economic power and wealth has 

overturned perceptions of what a downturn in the US economy means 

for the rest of the world. A decade ago, all regions would have felt a 

severe blow. But today, emerging markets such as Latin America, 

while not immune from the effects, are softening the impact by bolstering 

their ties with China and the world’s other rising economic powerhouses. 

Michel Demaré, CFO of ABB; Patrick Kron, CEO of Alstom; 

AG Lafley, CEO of Procter & Gamble; 

Vindi Banga, division manager at Unilever 

New routes to growth 

Emerging markets are claiming center stage in corporate business 

models, providing major opportunities when demand is stagnating in 

advanced economies. The biggest growth numbers now lie outside 

North America and Europe – a factor increasingly reflected in company 

order books. Business leaders stress that these shifts represent a 

structural change in the global economy, not a cyclical hedge against 

sluggish developed market growth. Companies are now looking to the 

BRIC economies to deliver benefits to the bottom line. This means 

adapting strategy to a new multipolar world, where retaining a competitive 

edge requires a sharply different skill set. Combining a global 

footprint with a local presence is just one way of staying ahead of the 

competition. 

Joe Prendergast, Credit Suisse Private Banking 

Peggers can’t be choosers 

Almost a quarter of the world’s currencies remain pegged to the US 

dollar, but, as other economies start to rival the USA, this approach is 

no longer viewed as the most attractive by a growing number of 

countries. The drift away from the dollar continues, though the pace of 

change will depend on how severely the US economy comes under 

pressure in coming years. 

GI 3.08 

Frontier Markets 

Trevor Manuel, Finance Minister of South Africa 

The view from the top 

As Africa basks in the global resource boom, Trevor Manuel talks about 

the opportunities and risks for both the people of the continent and 

investors. He already sees better financial management by national 

governments but expects further improvements in education standards, 

fiscal revenue and job creation. 

Peter R. Ryder, CEO Indochina Capital Group 

“Don’t miss Saigon” 

Vietnam is emerging from the shadow of larger Asian economies, posting 

robust GDP growth and pushing the envelope on reform. 

Peter R. Ryder, CEO of the Indochina Capital Group, which manages 

about USD 1.8 billion of assets mainly in Vietnam, explains why 

investors should beat a path to the door of a country offering a slew of 

opportunities, especially for those prepared to make longer-term 

commitments. 

Tope Lawani, Managing Director Helios Investment Partners 

Spotting the winners 

The news is good: growth is up, living standards are on the rise and an 

expanding group of sub-Saharan markets offer stronger growth opportunities 

to offset the maturing cycle elsewhere. But, as Tope Lawani 

explains, Africa is fundamentally a negotiated market. Detailed knowledge 

is the key to success. 

GI 1.08 

Beyond Charity 

Phil Bloomer, Duncan Green, David Bright, Oxfam; 

James Shikwati, CEO “The African Executive” 

Fighting poverty: Is aid the solution or the problem? 

There is intense debate about the role of aid in eradicating poverty and 

the scope for business to make an impact. Development agencies 

like Oxfam say the market can make a difference, but cannot provide 

all the answers. Others say aid fosters a mindset of dependence that 

prevents people from helping themselves. 

Ingo Malcher, journalist 

Business sense with a social touch 

Bank loans for vendors, insurance for the poor, infrastructure in slums – 

until recently, such ideas were foreign to low-income households 

and small microbusinesses in Peru. The Peruvian ACP Group owns a 

range of companies targeting the needs of the lowest economic 

strata of society in various Latin American countries. 

Arthur Vayloyan, Credit Suisse Private Banking 

Has charity lost its raison d’être? 

Alternatives to charitable giving are now playing a prominent role in 

alleviating poverty. 

GI 2.08 

Investment strategies for volatile markets 


Boom, bust and recovery 

Weighing the balance between long secular trends and short- to mediumterm 

cycles is a key input to investment decisions. The underlying influences 

from economics, politics, technology, demographics and finance 

are always evolving, but even so we believe there are many lessons to 

be learned from a long, historical perspective. 

Heinz Zimmermann, Head of Department of Finance, University of Basel 

“The costs and benefits of total return” 

Professor Heinz Zimmermann, an eminent finance scholar, comments 

on total or absolute return strategies that have become popular with 

many investors, especially with the dotcom crash still fresh in people’s 

minds. 

Hermann Pomberger, Allianz Switzerland 

“Focusing on and targeting an absolute return” 

Dr. Hermann Pomberger, Head of Asset Management, shares his 

views with us about total and absolute return strategies, and how they 

are used in practice. 

GI 3.07 

Innovation 

Giovanni Dosi, economist, Consultant for the OECD and UNCTAD 

The revolution is just starting 

Growing computer power, nanotechnology, gene science: it is easy to 

see the early 21st century as one of the globe’s most innovative 

periods. But it can be argued that what we have seen so far of this 

information-based, technoeconomic revolution has yet to cause shifts 

as profound as those triggered by, say, the Industrial Revolution or 

the invention of the internal combustion engine. Changes in the way 

we foster innovation are needed if we are to gain full benefits of the 

new revolution. 

Chris Anderson, “Wired” magazine 

“The YouTube effect is a wake-up call to the mass market” 

Niche products rather than the mass market: Chris Anderson, editorin-chief 

and best-selling author, explains the business of the future. 

C.K. Prahalad, author of “Fortune at the Bottom of the Pyramid” 

A new way of thinking 

Innovation passes not only from rich societies and their multinationals 

to emerging economies. Ingenious ways of thinking and doing business 

are increasingly flowing the other way too. This reflects a wider, global 

trend of greater customer influence on corporate behavior. The massmarket 

model that fails to differentiate between individuals is past. 

In developing economies, this means understanding awareness, access, 

affordability and availability from the perspective of the poor. 

GIF 2.07 

Leisure 

Jonathan Gershuny, sociologist University of Oxford 

Wealthy but no time to enjoy it 

In the 19th century, the rich not only had the most money but an abundance 

of time in which to spend it. Today’s moneyed are more likely to 

be working late at the office than dabbling in the arts or indulging their 

sporting whims. Meanwhile, it is the poor people of the developed 

world, struggling to compete for manual jobs in the face of competition 

from emerging economies, who tend to have more hours for leisure but 

also limited means with which to enjoy it. 

Eike Wenzel, Editor-in-Chief Zukunftsinstitut Germany 

Wealth is dead! Long live worth 

Time will be the key resource in tomorrow’s world. Striving for more 

free time – or time affluence – will become the dominant trend of the 

future, affecting not just the consumer sector but financial services as 

well. The contemporary ethic of pursuing material gratification and 

monetary prosperity will become much less important than achieving a 

healthy balance between professional ambition and individual well-being. 

Foong Wai Fong, Director Megatrends Asia 

Asia warms to the cool life 

The future of Asian leisure promises a mixture of wealth and creativity. 

Society’s changing attitudes are driving the development of new 

leisure options and ideas, supported by the wealth accumulated from 

more than 50 years of hard work and toil. In line with a generational 

shift towards greater financial security, the region’s youth are shifting 

from surviving to living. Business and social networks are beginning 

to merge into one. 

GIF 1.07 

GI 1.07 

Global families 

Michael Detmar, Pharmacogenomics ETH Zurich and Harvard 

New technologies for the identification of interindividual 

genetic variations 

Interview with Michael Detmar, Professor at ETH Zurich and Associate 

Professor at Harvard University. 

Anja Hochberg, Christine Schmid, Credit Suisse Research 

The hidden asset 

Women contribute more than 50% to the world economy and the share 

of women in paid work is rising. While there are still obstacles for women 

to fully participate in the production process, women are increasing 

their spending power. Demographics add to the picture, as more and 

more divorced and widowed women will have to make their own financial 

decisions. This development is mirrored in the developing world 

where the majority of immigrants are women. 

Kishore Biyani, CEO Future Group 

Modern retailing in India 

India probably provides the largest consumption opportunity in the 

world. However, the country has been slow in letting foreign retailers 

into the domestic market. Those who want a piece of this cake should 

do their homework first, as India is a country where standardized solutions 

don’t work. Global Investor spoke to Kishore Biyani, founder and 

Managing Director of Pantaloon Retail India Ltd. 

Security & Conflicts 

Michael T. Klare, Peace and World Security Studies 

Time to act on resource wars 

The coming century could witness an endless succession of resourcebased 

conflicts as a growing world population consumes ever more 

commodities in pursuit of higher living standards. In order to alleviate 

fundamental dangers for consumers and investors alike, we must turn 

to international legislation rather than arms to settle our differences. 

Robust laws allied to greater conservation of natural resources and 

the technological development of alternatives can help reduce the risk 

of resource wars. 

Andreas Wenger, Center for Security Studies 

The new era of global conflict 

Civil wars in politically fragile, ethnically fragmented and economically 

weak societies are the focal point of international security policy at 

the outset of the 21st century. At the same time, global risks are increasingly 

superseding local and regional conflict hotspots. Asymmetric 

patterns of conflict are emerging from the concurrence of these two 

trends, ensuring that violent political conflicts in coming years are likely 

to be characterized by a high degree of complexity. 

Thomas Straubhaar, Hamburg Institute of International Economics 

The bounty of globalization 

The world’s population is expected to grow by 40% by 2050, triggering 

greater levels of migration from poorer continents to richer. Demand 

for natural resources will be fiercer while tension between new immigrants 

and indigenous groups may start local conflicts alongside the 

national confrontations over commodities. There is, amid this gloom, 

reason to be optimistic. Man creates or discovers answers to his problems 

when they are most urgent. Over the past 30 years, for example, 

the quantity of proven, extractable resources from the Earth has 

risen in spite of greater consumption by more people. This experience 

can be repeated in our time. 

GIF 2.06 

GI 3.06 

Banking for 7 billion and for 7 million 

Nand Kishore Singh, Deputy Chairman Planning Commission of Bihar 

The elephant can dance 

Despite a well-educated and technologically adept workforce, and 

immense natural resources, India faces huge obstacles to growth and 

development. But where there are risks, there are also opportunities, 

and where there are challenges, there are solutions, says Nand 

Kishore Singh of the Government of Bihar and former main advisor to 

India’s prime minister. 

Paul Calello, CEO Credit Suisse Asia Pacific 

Doing business with the best 

Paul Calello on private banking in one of the most diverse regions 

in the world. 

Happiness 

Stephen Law, lecturer in Philosophy 

Is feeling good always what motivates us? 

Happiness is elusive – something we work hard to achieve, yet rarely 

seem to find. As T.S. Eliot reminds us, the harder we strive to attain 

happiness, the more quickly it seems to recede over the horizon. 

Bruno S. Frey, economist University of Zurich 

Happiness can be measured 

Most people believe happiness cannot be measured, however, recent 

advances in research enable individuals to capture how happy they feel 

themselves to be. The different notions of happiness can be measured 

by representative surveys of individual life satisfaction, experience 

sampling, the Unhappiness Index and brain scanning. They correlate 

highly with aspects generally associated with happiness. The insights 

help us to improve policy-making by allowing individuals to best 

achieve their own path to happiness. 

Maria Custer, Credit Suisse Research 

Medical breakthroughs optimize health and happiness 

Possibly the most obvious way in which spending can boost happiness 

is by helping people to stay healthy or to overcome illness. The enormous 

strides in pharmaceuticals over the last century, and particularly 

the last five decades, are a crucial component of this. Today, for 

example, drugs against pain, anxiety, depression, infections and the 

contraceptive pill influence our lives and play an important role in 

contributing to our happiness and lifestyle. 

GIF 1.06 

International intellectual property 

Giles Keating, Jonathan Wilmot, Credit Suisse 

Intellectual fireworks 

Ideas, not resources, are the fundamental source of human wealth. 

A battle has always waged between those who create the ideas and 

those who want to exploit or imitate those ideas for their own benefit. 

This results in relentless competition and international tension. 

Thomas Rauch, Credit Suisse Equity Strategy 

Building material companies seeking foothold in emerging markets 

At this stage in the development of the emerging markets, the acceleration 

of urbanization in China and India is exceeding the normal supply 

and demand cycles for infrastructure and housing needs, as happens 

where industrialization is coupled with wealth generation for a larger 

group of people. As a consequence, building material companies are 

increasingly trying to gain a foothold in the emerging markets. 

Markus Mächler, Ulrich Kaiser, Credit Suisse 

Safety first in the twenty-first century 

The latest X-ray technology allows a 40-ton truck to be scanned within 

seconds for illegal goods, bombs or weapons. Radio Frequency Identification 

(RFID) tags are small chips used against theft and forgery, 

as well as in safety, distribution and access control systems. The latest 

Electronic Stability Control (ESC) braking systems can help reduce 

the risk of rollover in light trucks. Security has taken on a new meaning 

in the twenty-first century. 

GI 2.06 

Phases of globalization 

Giles Keating, Burkhard Varnholt, Credit Suisse 

Globalization as a long-term investment opportunity 

The integration of developing countries into the global economy presents 

a wide range of investment opportunities, though not without 

some challenges. Discussion with Giles Keating, Head of Global 

Research, and Burkhard Varnholt, Head of Financial Products & Investment 

Advisory. 

Lars Kalbreier, Cédric Spahr, Credit Suisse Research 

Fine line between some emerging and developed markets 

Some countries labeled as emerging markets present characteristics 

more similar to developed markets, but are still valued at steep discounts. 

For example, South Korea trades at a discount of 25% to the 

euro zone. Its market has risen strongly in 2005, which we see as the 

starting phase of a medium-term rerating, helped by higher economic 

growth and solid fundamentals. 

Roger Signer, Credit Suisse Research 

Indonesia: Are we looking at a turnaround? 

President Yudhoyono’s policies have helped to stabilize the political 

situation in Indonesia, and are aimed at improving the investment 

climate and infrastructure. As a result, foreign direct investment flows 

are on the rise, and the economy is becoming consumption-driven. 

GI 1.06 

Energy 

Giles Keating, Tobias Merath, Credit Suisse Research 

High energy prices to stimulate innovation 

One of the mysteries of the global economy is that the energy and 

commodity sectors have been investing in refineries at only a modest 

pace for two to three decades, as if unaware of the boom in Asia. 

Meanwhile, the world’s manufacturers, big and small, are expanding 

operations in Asia at breakneck speed. Little wonder that energy and 

commodity prices have risen sharply. The questions now are: how long 

can these high commodity prices persist, and how will the industrial 

sector react? 

Lars Kalbreier, Hervé Prettre, Credit Suisse Research 

Breaking global dependence on oil will take decades 

Natural disasters in 2005 exacerbated structural demand/supply imbalances 

and sent oil and gas prices skyrocketing. The surge in price 

has once again shifted the spotlight from fossil fuels onto alternative 

energy. This trend is hardly new. The burning question is: how long will 

it take before these non-oil energy sources can pick up the slack? 

Roselyn Bachelot-Narquin, member of the European Parliament 

Energy is the No. 1 challenge to sustainable development 

Today, renewable energy accounts for only 11% of our current energy 

use. In order to safeguard our future and that of the planet, renewable 

energy must become the source of power for the future. Energy choices 

are not only the responsibility of governments, but also of the public. 

Making the right choices now is the right step toward combating global 

warming and its disastrous effects. 

GIF 3.05 

Diversification 

Cédric Spahr, Credit Suisse Equity Strategy 

Globalization as a long-term investment opportunity 

When investors build a portfolio of different assets, they should not only 

consider the risk/return characteristics of the individual assets, but 

also analyze how they interact with one another as a whole. In investments 

– as in life – the whole is often more than the sum of its parts. 

John M. Feigl, Michael Gähler, Credit Suisse Research 

An equity alternative with an embedded diversification effect 

Convertible bonds are attractive diversification instruments, offering 

equity exposure with limited downside risk. At present, prices look 

attractive due to historically low equity volatility. 

Jim Rogers, cofounder Quantum Fund 

“Oil fields are depleted and mines depleted ...” 

Credit Suisse recently had the opportunity to pose some questions on 

commodities to James “Jim” Rogers, cofounder of one of the first truly 

international macro hedge funds. 

GI 3.05 

Nanotechnology 

Karl Knop, nanotechnology expert 

Nanotechnology: A big future for small things 

Bigger isn’t always better. Billions of dollars are invested in nanotechnology 

research each year by companies and governments worldwide 

to substantiate this claim. Today, the “technology of the tiny” is still 

in its embryonic phase, but it harnesses huge potential. The benefits 

of this budding science are already apparent in the fields of health 

care, materials, information technology and many more. 

Heinrich Rohrer, Nobel Prize winner; Viola Vogel, ETH; 

Rita Hofmann, Head of Research and Development Ilford Imaging; 

Hans-Joachim Güntherodt, Swiss National Science Foundation 

Unraveling the big debate over small sciences 

Nanotechnology has been touted as the panacea for many of the 

world’s ailments, but what are its real capabilities? How much of what 

has been reported in the popular press is speculation, and how many 

breakthroughs are really just around the corner? Four leading experts 

in the field joined a question-and-answer forum to help us weed the 

facts from the fiction. 

Rita Hofmann, Head of Research and Development Ilford Imaging 

“Our development inevitably led us to nanotechnology” 

The English company Ilford, a 125-year-old stalwart, was for decades 

the undisputed market leader in the field of monochrome photographic 

materials. Then the digital camera burst onto the scene, triggering 

the inexorable decline of traditional photography, which for Ilford UK 

culminated in insolvency one year ago. However, Ilford’s Swiss arm – 

Imaging Switzerland GmbH in Marly near Fribourg – took a new and 

pioneering path early on, entering the lucrative and growing nanotech 

printing paper business. 

GIF 2.05 


Richard Watson, futurologist 

“We can actually invent a future we’re happy with” 

Best-selling author Richard Watson turns predictions on their head. 

He says we have the power to shape tomorrow by looking at the present 

and holding a meaningful conversation about where the risks and 

opportunities lie. 

Ray Kurzweil, scientist and inventor 

“Going beyond our limitations” 

Computers whose intelligence far outstrips our own, the virtual reality 

of the film “The Matrix” and tiny robots that travel through our bloodstreams 

destroying pathogens may seem like the stuff of the distant 

future. But Ray Kurzweil says not only are they coming, but they will be 

with us soon, as exponential growth in computing power changes our 

lives and, indeed, our very beings. 

Rajendra K. Pachauri, The Energy & Resources Institute 

The road to a green future 

The need to cut carbon emissions and use our natural resources sustainably 

requires the introduction of a host of new green technologies 

to power our vehicles, provide electricity and make an impac t in many 

other areas of our lives. That provides major opportunities for companies, 

in both the developed and developing world, to seek a share 

of a fast-expanding market. But the transition from fossil fuels to green 

technologies will be neither swift nor smooth. 

GI 2.09 

Marketing and innovation 


Marketing versus innovation: Is the balance right? 

Marketing and innovation have been two inseparable parts of capitalist 

success since the earliest days of the industrial revolution. Craftsman 

Thomas Chippendale published his “Furniture Catalogue” in 1754. 

Maria Custer, Luís Correia, Credit Suisse Research 

The European chemicals industry: Innovation is the key 

to remaining competitive 

The golden age of chemicals innovation (i.e., dyes, fertilizers, plastics 

and many other products) ended in the 1960s and was followed by 

decades of limited, incremental development. Now at last, that is 

changing as interdisciplinary research promises a new era of genuine 

innovation. 

Markus Mächler, Credit Suisse Research 

Driving the future 

For the car industry, developed countries are replacement markets, 

where new customers can only be acquired by gaining market share 

from the competition. Marketing and sales incentives are key elements 

of this strategy, but in mature markets like Europe and North America, 

they rapidly become a zero-sum game. 

GI 2.05 

Microfinance 

Jane Nelson, University of Harvard 

Harnessing the potential of microfinance 

How to give 500 million microentrepreneurs access to fi nancial services. 

In the world’s most successful economies, small and microenterprises 

serve as a major engine of job creation and economic growth. However, 

those operating in developing countries often lack access 

to reliable financial services. This does not have to be the case. We 

have the solutions within our reach – and they include the creation 

of more inclusive financial markets that profitably serve these needs. 

Klaus Tischhauser, responsAbility Social Investments 

Ecuador: The market, credit systems and clients 

A closer look at Ecuador reveals some of the different approaches 

used in the field of microfinance. 

Ernst A. Brugger, The Sustainability Forum 

Is access to capital a key factor for development ? 

Davos roundtable. Globalization is a powerful process, but it has not 

yet resolved the problem of widespread poverty in many parts of the 

world. Is microfinance a possible, sustainable solution for the promotion 

of business initiatives at the bottom of the social pyramid? 

Is there an untapped market for the creation of jobs and incomes? 

GIF 1.05 

Issue 03 

September 2007 

Global Investor 


Investment strategies for volatile markets 

Boom, bust and recovery The long-term view on financial market performance 

Investing across cycles Controlling the risk of loss on equity exposures 

Hedge fund investments Interview with an experien ced fund of hedge fund 

manager 

www.credit-suisse.com/research 

Trevor Manuel, South African Finance Minister Harnessing greater 

investment will help jump-start Africa’s economic renaissance 

Harry Broadman, World Bank Africa’s business climate is transforming, 

creating new opportunities for investors seeking first-mover advantage 

Lars Kalbreier, Credit Suisse The time is right for investors to 

start building selective positions in the most attractive frontier markets 

Focus Frontier Markets 

New opportunities hit global investors’ radar screens 

Global Investor 1.08, January 2008 


Global Investor 2.08/US edition, March 2008 



Social responsibility is no longer the preserve of charity 

Phil Bloomer, Oxfam Markets and trade can be extraordinarily powerful motors 

for poverty reduction, but aid still has a massive role to play 

James Shikwati, IREN Aid as we know it today is wrong. It masks the fact that 

donors are imposing their own views of development on poor countries 

Luis Felipe Derteano, ACP Group A business model that provides the tools to 

help the poorest strata overcome social and economic exclusion 

Global Investor 3.08, September 2008 



Shifting sources of global economic growth 

Standpoints Javier Santiso Director of the OECD Development Centre 

Danny Quah Professor at the London School of Economics Tonia Kandiero 

Economist at the African Development Bank Wei Gu Financial Journalist 

for Reuters Larry Kochard CIO at Georgetown University Michel Demaré 

CFO of ABB Patrick Kron CEO of Alstom Vindi Banga President of Foods, 

Home & Personal Care at Unilever AG Lafley CEO of Procter & Gamble 

Global Investor 1.09, April 2009 



Managing risks around cycles and supercycles 

Wolfgang Drobetz Style investing comes back into fashion, simplifying investor 

choice with a structured approach. Zhang Xin Strategies for defying the 

downturn in China’s real estate sector. Thomas Straubhaar Taking a scientific 

approach will teach important lessons about overcoming the credit crunch. 

Nancy McKinstry The media sector’s response to the global recession. 

Issue 01 

June 2006 

Sources of happiness 

Chasing happiness A philosopher’s perspective 

Measuring happiness The economics of feeling good 

Trends How to invest in happiness 



Focus 

Issue 02 

June 2006 

Globalization from a different angle 

International intellectual property 

Basics Energy, building material, soft commodities 

Enrichment Consumption, safety 

Switching Microfinance, immigrant banking, new frontiers 



Leisure 

Recreation or relaxation The value of free time 

Self-organization Stage-managing work and play 

New luxury Opportunities for the leisure industry 


Focus 


Issue 01 

February 2007 

Issue 01 

January 2006 

Phases of globalization 

Basics Infrastructure, real estate, energy 

Enrichment Personal digital media 

Switching Outsourcing, mobile telecom, valuation, Indonesia 



Issue 02 

October 2006 

Security & Conflicts 

Resource wars – the curse of the 21st century? Michael Klare 

Growth is good for your health (care) Daniel Vasella 

Globalization’s bounty Thomas Straubhaar 



Focus 

undiversified 

diversified 

undiversified 

undiversified 

undiversified 

g 

Expert know-how for Credit Suisse investment clients August 2005 

DIVERSIFICATION 

Asset allocation Whole exceeds sum of parts 

Foreign exchange Investing for private clients 

Alternative investments New asset classes 

Convertible bonds An equity alternative 

Interview with Jim Rogers 

Commodities Investing in commodities 

Healthcare More than just big pharma 

Hedge funds Enhancing portfolio diversification 

Real estate An asset class too 

Middle East Not merely an oil story 

African telecoms Interesting prospects 

Advertising Opportunities abound 

Global Investor Focus 

Expert know-how for Credit Suisse investment clients June 2005 

NANOTECHNOLOGY 

A big future for small things? // Karl Knop 

Round table discussion // Heinrich Rohrer, Rita Hofmann, Hans-Joachim Güntherodt, 

Viola Vogel, Arthur Vayloyan 


Expert know-how for Credit Suisse investment clients November 2005 

ENERGY 

Global economy > High energy prices to stimulate innovation 

Oil versus alternatives > Breaking the global dependence on oil 

Kyoto and emissions > Emissions trading as an investment opportunity 

Alternative energy > Five sectors in the spotlight 

New challenges and opportunities of globalization 

Banking for 7 billion and for 7 million 

Basics Global warming, real estate investment trusts, 

public-private partnerships, European public sector bond issuers 

Enrichment Digital advertising, liberalization of sports betting 

Switching Nanotechnology, alternative investments, 

brands in the emerging markets 



Issue 03 

September 2006 






global market in green technologies Zhouying Jin How to make the transition 

from “Made in China” to “Created in China” Ray Kurzweil The acceleration 


to match and even exceed human intelligence Richard Watson We have the 

power to shape the future by looking at the present 

Global families 

Basics Finding answers in our genes, 

21st-century clean energy homes, evolution of senior housing 

Enrichment The hidden asset, 

modern retailing in India, stocks with family influence 

Switching Media for you and me, the new digital paradigm 


Issue 01 

January 2007 


MARKETING EXPENSES 

R&D EXPENSES 

93 94 95 97 98 99 00 01 02 03 

96 


Marketing versus innovation Is the balance right 

Chemicals oderniation is ey to remaining competitive 

Healthcare Innovation resurgent in big pharma 

Automobiles riving the future 

Technology Not yet poised for the net upcycle 

Covered Bonds European covered bonds in the spotlight 

Swiss Real Estate Stocs ready to tae a breather 

MARKETING AND INNOVATION 

Expert know-how for Credit Suisse investment clients May 2005 


Expert know-how for Credit Suisse investment clients May 2005 

MICROFINANCE 

Can microfinance create a more prosperous and peaceful world? // Jane Nelson 

Microfinance enters the mainstream // Christian Gattiker, Sylvie Golay 

Davos microfinance roundtable // Walter B. Kielholz, Giles Keating, Paola Ghillani, 

Jane Nelson, Hernando de Soto, Roshaneh Zafar 

responsAbility – and other ways to invest in microfinance // Klaus Tischhauser 


Shifting sources of global economic growth 

Standpoints Javier Santiso Director of the OECD Development Centre 

Danny Quah 

y 

Professor at the London School of Economics Tonia Kandiero 

Economist at the African Development Bank Wei Gu Financial Journalist 

for Reuters Larry Kochard 

y 

CIO at Georgetown University Michel Demaré 

CFO of ABB Patrick Kron CEO of Alstom Vindi Banga 

g 

President of Foods, 

Home & Personal Care at Unilever AG Lafley CEO of Procter & 

r 

Gamble 







Luis Felipe Derteano 

p 

, ACP Group A business model that provides the tools to 



Managing risks around cycles and supercycles 

Wolfgang Drobetz Style investing comes back into fashion, simplifying investor 

choice with a structured approach. Zhang Xin Strategies for defying the 

downturn in China’s real estate sector. Thomas Straubhaar Taking a scientific 

approach will teach important lessons about overcoming the credit crunch. 

Nancy McKinstry The media sector’s response to the global recession. 

The Global Investor routinely casts a spotlight on major issues worldwide and their future relevance to investors. In the current 

Global Investor we look back at previous issues and offer a top selection of intriguing articles for you to peruse. 

Give yourself a clearer view of the future: order past issues of Global Investor from hotline.research@credit-suisse.com. 

The megatrends in the Global Investor


very long way off. The big ones tend to 

come in groups, and when they hit the 

shore, they may shoot off in the opposite 

direction. Still, it’s probably safe to say 

that the future will be even more connected 

than it is now. And consumers are moving 

toward more mobile devices, with the 

phone replacing the wallet and so on. That 

sort of information suggests certain directions. 

I wouldn’t be investing heavily in the 

publishers of physical phone directories 

right now, for instance. Demographics is 

also a very certain area in terms of trends. 

Short of World War III or a genuine pandemic, 

we know roughly how many old 

people there will be in the future. We also 

know that they will live longer and be 

healthier, and that surely will drive certain 

vectors. Medicine is the most obvious, 

but it isn’t the only one. Most people are 

aware of that. 

In your “Extinction timeline 2000–2050,” 

you predict the end of futurists. Why do you 

think that the future will have no need 

of trend researchers? 

Richard Watson: These maps that I do 

are essentially me doodling and having 

a bit of fun, stirring things up. But there’s 

usually some logic involved as well. I took 

the view that everything has a cycle and 

eventually becomes more or less extinct. 

At the moment, there’s tremendous interest 

in futurists owing to so much uncertainty 

and anxiety. Ironically, no futurists 

saw that coming. My theory is that in 

50 years’ time or whenever, the world will 

have settled down and become much 

more predictable. And we will also possess 

a phenomenal amount of data, 

thanks to technology. So I think futurists 

will just sort of die out. 

The picture that your maps paint is generally 

positive. Is that really how you see 

the future, based on everything you know? 

Richard Watson: I’ve been accused of 

being an optimist. I mean, I look at climate 

change and peak oil and all the rest of it, 

and it doesn’t worry me that much. Adversity 

breeds innovation. And quite frankly, 

my feeling is that we’ll solve these things. 

But, to repeat a point I made earlier, it will 

take more than simply trying to anticipate 

the future or follow trends. Instead, 

we should put on our deep-thinking caps, 

collectively agree on a future that 

we like the sound of, and then invent it. 

To some extent, we can do that. Thinking 

is a powerful tool. 

Richard Watson is a futurist writer, consultant 

and speaker who advises organizations 

on the impact of trends on long-term strategy. 

He is the author and publisher of “What’s 

Next,” a quarterly report on global trends, 

as well as the best-selling book “Future Files” 

and writes for a number of leading business 

publications globally. He also works on 

scenar io planning, research and innovation 

projects with a number of global companies. 

His specific areas of expertise include 

retail banking, newspapers, airlines and 

supermarkets. 


www.credit-suisse.com/globalinvestor 

Photo: Martin Mischkulnig

GLOBAL INVESTOR 2.09 Contents — 06 

New, post-carbon technologies will power our 

vehicles, provide electricity and make an impact in 

many other areas of our lives. This will provide 

opportuni ties for companies, in both the developed 

and developing world, to seek a share of a fastexpand 

ing market. But the transition from fossil fuels 

to green technologies is unlikely to be smooth, says 

Rajendra K. Pachauri, Chairman of the Intergovernmental 

Pane l on Climate Change. > Page 31 

“The world’s swelling population will 

only be able to reach a semblance 

of balance through the development 

and use of green technologies.” 

Rajendra K. Pachauri 

Polaroid cameras, invented in 1947, are a 

classic relic of the analog age. Back then, 

however, instant photography was a fascinating 

symbol of the remarkable progress of technology. 

Polaroid photography still holds a strong appeal 

toda y but the company decide d to stop producing instant film in 

2008. Which is why a firm called Impossible is working on 

bringin g the traditional instan t film back to the marketplace in the 

not too distant future. If you don’t want to wait, you can download 

the free software “Poladroi d” and add the iconic white frame to 

your digital photos with the click of a mouse.

GLOBAL INVESTOR 2.09 Contents — 07 


Investment research 

08 

In search of tomorrow’s megatrends 

Analysis of past major trends shows us how future megatrends 

are likely to develop, writes Lars Kalbreier, Global Head 

of Equity and Alternatives Research. 

10 

Moving on from “Made in China” 

China has established itself as the world’s leading manufacturing 

center, thanks largely to its exports’ price competitiveness. 

The challenge now is to boost the country’s innovation 

capabilities, argues Zhouying Jin. 

China’s textile challenge: Climbing the value chain > Page 12 

The rise of emerging market brands > Page 16 

17 

The aging challenge 

The demographic shift towards an aging population presents 

opportunities to cater to a whole new consumer class, write 

Ilona Kickbusch of the Graduate Institute of International 

and Development Studies, Geneva, and Prisca Boxler of the 

World Demographic and Ageing Forum. 

21 

Averting future food shortages 

Reluctance to push ahead with large-scale investment in crop 

modification to boost yields could cost us dear, argues 

Joachim von Braun, Director General of the International Food 

Policy Research Institute. 

Old and new techniques combine in plant breeding > Page 22 

24 

Science or science fiction? 

Robots are already part of our everyday lives, but getting 

them to emulate the complexities of humans will be a tough 

challenge, writes Rolf Pfeifer of the University of Zurich. 

28 

“Going beyond our limitations” 

Scientist and inventor Ray Kurzweil: exponential growth in 

computing power will change our lives and, indeed, our very 

beings, fusing human and artificial intelligence. 

31 

The road to a green future 

The need to cut carbon emissions and use our natural 

resource s sustainably requires the introduction of new green 

technologies, argues Rajendra K. Pachauri, Chairman of the 

Intergovernmental Panel on Climate Change. 

36 

Electric vehicles 

In order to achieve strategic targets relating to environmental, 

industrial, political or geopolitical issues, a global race for 

technology leadership has begun. Governments are encouraging 

their domestic industries in efforts to better position their 

leading firms. This will likely result in an acceleration of technological 

progress in the coming years, argue Reto Hess and 

Pierre-Yves Bolinger. 

40 

New asset classes linked to natural disaster risks 

Providing insurance coverage for large natural disasters 

require s well-capitalized insurance companies. Some of these 

natural disaster risks are transferred to financial investors, 

who have earned attractive returns, write Cédric Spahr and 

Reto Meneghetti. 

42 

Desert power and the global energy equation 

In summer 2009, 14 companies joined forces in a project 

aimed at meeting up to 15% of Europe’s energy demand. The 

Desertec Industrial Initiative could radically change the global 

energy equation, predict Lars Kalbreier and Roger Signer. 

45 

Building on Africa’s promise 

The continent’s long-term economic prospects remain promising 

thanks to the development of three key sectors: 

commodi ties, infrastructure and mobile telecommunications, 

write Eric Güller and Robert Ruttmann. 

48 

Renaissance of Swiss franc bonds 

The last 30 years have seen a general decline of the Swiss 

franc as an international reserve and safe-haven currency. 

However, Swiss franc bonds may see a revival as a valuepreservation 

vehicle, predicts Nannette Hechler-Fayd’herbe. 

50 

Cloud computing – the future of corporate IT 

While consumers have been familiar with “cloud-based” 

technolo gy for some time now, corporates have been lagging 

behind. This may change, offering a USD 150 billion market 

opportunity, write Ulrich Kaiser and Steffen Sabas. 

Disclaimer > Page 54 

Authors > Page 56


In search of tomorrow’s 

global megatrends 

There is nothing new about global megatrends – our world has been shaped by them for thousands 

of years. Most have been triggered by the irruption of a major change, such as a technological 

breakthrough or a shift in a geopolitical balance. Megatrends have altered the world for decades or 

even centuries and ultimately led to an improved quality of life and greater wealth. Analysis of these 

past developments shows how future megatrends are likely to develop. 

Lars Kalbreier, CFA, Credit Suisse Global Head of Equity and Alternatives Research 

Catching on fast 

The pace at which technological 

innovations have been taken up 

by the public has increased over 

the last decades. 

Railroads 

Radio 

Personal computer 

24 * 

69 * 

Telephone 

Television 

Internet 

59 * 

23 * 

Cell phones 

16 * 

New life sciences 

Alternative energy 

Nanotechnology 

99 * 

125 * 

*Number of years after invention reaches 80% country coverage (USA). 

Photo: Getty/Toledano 

1750 – 1900 1900 – 1950 1950 – 1975 1975 – 2000 2000 – ????


One of the earliest identifiable megatrends 

is the switch to a sedentary lifestyle by humans 

to ensure their survival. This transformed 

nomads into villagers, individuals into 

citizens and marked the starting point of 

civilization by replacing the “survival of the 

fittest” paradigm. This set the stage for another 

megatrend, the development of great 

empires in Asia, Mesopotamia and later in 

Europe with money, codified laws and centralized 

governments. Further megatrends 

followed, with the European enlightenment, 

the independence of North American colonies 

and the rise of the USA. The use of 

coal as an energy source introduced industrialization 

and transportation megatrends, 

which revolutionized Europe over the subsequent 

century. The megatrend stemming 

from the invention of the mass-market computer 

enabled an unprecedented jump in productivity 

of employees from the late 1970s. 

These past megatrends took time to 

spread across the whole population. However, 

cycles of change have diminished 

through history: while it took more than 50 

years for steam energy to reshape the industrial 

and transportation landscapes of 

Europe in the 19th century, it took less than 

ten years for the Internet to change individuals’ 

lifestyles in the 1990s. 

What are the 21st-century megatrends? 

Current and future megatrends can be 

traced back to three distinct, yet interrelated, 

pillars: (1) rapidly changing demographics, 

(2) the increasing emergence of a multipolar 

world and (3) the need for sustainability. 

The demographic challenge 

Rapid population growth in emerging markets 

and increasing aging, mainly in developed 

markets, represent the starting point 

of the current cycle of megatrends. The 

world’s population has more than doubled 

in the past 40 years to around 6.8 billion – 

the high est growth rate ever recorded – on 

the back of technological, sanitary and 

medical advanc es. The United Nations forecasts 

that global population will grow another 

50% by 2050. 

Moving to a multipolar world 

At the same time, the world will increasingly 

become multipolar, as wealth rapidly spreads 

from the developed to the developing world. 

As a result of accelerating globalization, 

more emerging market countries are participating 

in the global economy. Their citizens 

are becoming wealthier and will, to a large 

Demographics 

➥ Urbanization 

➥ Infrastructure 

➥ Developed brands 

➥ Mobility 

➥ Security 

➥ Migration 

➥ Healthy living 

➥ Nutrition trends 

➥ Health care 

➥ Medical equipment 

➥ Pharmaceuticals 

➥ Leisure 

➥ Education 

➥ Agriculture 

extent, live in the urban centers of “emerging 

cities,” rather than in rural areas. This, in 

turn, is increasing the importance of emerging 

markets globally, both from a political 

and an economic point of view. It is no coincidence 

that G8 meetings are increasingly 

becoming G20 meetings, which include major 

emerging market countries. 

The need for sustainability 

The two previous pillars (demographics and 

a multipolar world) have placed an extraordinary 

burden on limited existing resources, 

with a potentially catastrophic impact on 

our climate. Sustainability is thus becoming 

increasingly important for human beings’ 

future. 

Demand for resources is growing rapidly 

due to population growth and greater wealth: 

for instance, between 1950 and 2000, oil 

demand increased sevenfold, and aluminum 

demand increased by 15 times. In the coming 

years, this trend is expected to further 

accelerate as emerging markets develop 

rapidly. But the combination of rising demand 

and resource depletion is leading to 

imbalances in an increasing number of areas. 

A recent UN study, for example, estimates 

that, at current consumption levels, 

two-thirds of the world population will suffer 

from water scarcity by 2025. One key 

method of restoring the balance between 

Lars Kalbreier, CFA, is a Managing Director and 

Global Head of Equity and Alternatives Research 

at Credit Suisse. Previously, he held various 

positions within investment banking and investment 

management at JPMorgan in London. 

Pillars of the megatrends 

Multipolar world 


➥ Emerging markets 

➥ Brazil 

➥ China 

➥ India 

➥ Russia 

➥ etc. 

➥ Frontier markets 

➥ Africa 

➥ etc. 

➥ Emerging producer 

➥ Emerging brands 

➥ Traditional energy 

➥ Hidden resources 

➥ Emerging banking 

➥ Mining 

➥ Emerging consumer 

➥ Developed brands 

➥ Logistics 

Sustainability 

➥ Innovation 

➥ Genetics 

➥ Robotics 

➥ Nanotechnology 

➥ Biotechnology 

➥ Digital world 

➥ Environment 

➥ Alternative energy 

➥ Water 

➥ Air 

➥ Resource efficiency 

➥ Timber 

➥ Community 

➥ Microfinance 

➥ Social responsibility 

supply and demand is the sustainable generation 

of resources, as well as more efficient 

use of existing resources. This will 

lead to the development of new industries 

(cleantech, nanomaterials etc.). 

Innovation is key to sustainability 

Throughout history, mankind has addressed 

challenges through an unparalleled ability to 

adapt, often overcoming hardship through 

innovation. Moreover, there have been numerous 

occasions when “experts” predicted that 

megatrends would never develop, only to be 

proven wrong as they consistently underestimated 

the power of innovation. 

A good example is provided by the vehicle 

industry: in 1999, General Motors decided to 

drop production of the “EV1,” the first electric 

production vehicle, judging that electric vehicles 

would never be profitable. Ten years 

later, Tesla, an upstart car manufacturer, 

started production of its “Electric Roadster” 

and recorded its first profit ever due to major 

innovations in the field of battery technology. 

Meanwhile, GM filed for bankruptcy. 

This example illustrates the critical importance 

of innovation and its role in shaping 

megatrends. Going forward, innovations 

in the field of genetics, robotics and nanotechnology 

(GRN) and elsewhere are likely 

to play a major role in pushing current megatrends 

to new frontiers. We expect the 

megatrends linked to the three pillars – demographics, 

a multipolar world and sustainability 

– to significantly alter the world we 

live in, and also create significant investment 

opportunities, which Credit Suisse 

will be monitoring closely.


Moving on from 

“Made in China” 

In the space of just three decades, China has established itself as the world’s leading manufacturing 

center. Its products have won the confidence of customers, thanks largely to their price competitiveness. 

But the challenge now is to shift up a gear. Companies need to boost their innovation 

capabilities and enhance their creativity so that “Created in China” becomes synonymous with 

the country’s products. 

Zhouying Jin, Director, Center of Technology Innovation & Strategy Studies, Chinese Academy of Social Sciences, Beijing 

“Made in China” marks out China’s position at the basic end of the 

global industrial chain, yet for 30 years, the label has set a number 

of world records and contributed strongly to global economic growth. 

“Made in China” has become an iconic global label not just because 

of China’s market competitiveness, based on its low-cost and 

low-pric e advantages, but also because a majority of Chinese manufacturers 

comply with the requirements of customers when they 

produce brand products for foreign companies. They have won the 

confidence of their international partners and assisted in the rise of 

their brands. 

Although the proportion of China’s high-tech product exports in 

total foreign trade volume has reached 29%, more than 90% of 

product exports are still dependent on the processing trade or original 

equipment manufacturers. With the deepening participation of 

“Made in China” in global competition, this has exposed a set of 

contradictions, such as the lack of core technologies, too few 

Chines e own-brands and channels, technical barriers, trade protection 

and the poor quality of some products. These factors have 

brought “Made in China” to a crossroads. 

No country would be able to foster its Nobel laureates merely 

by raising R&D funding for a while. It is, no doubt, necessary that 

manufacturers invest more in R&D and try to design more products 

with high value-added components and independent branding, but 

making the leap from “Made in China” to “Created in China” re quires 

enhanced innovation capability across the entire country. This in turn 

demands long-term efforts to change the innovative environment, 

mechanisms of innovation and the training of innovative talents. 

These things cannot be leapfrogged. Improving the technical content 

of “Made in China” or increasing the range of products with independent 

intellectual property rights are only two of its corollaries. 

Enhancing the creativity of the whole nation to achieve “Created 

in China” must be built on a long-term perspective, adopting systematic 

solutions. 

1_Raising creativity should be the 

long-term strategic objective 

The Eleventh Five-Year Plan has elevated the enhancement of 

capacit y for independent innovation to a national strategy. But a correct 

strategic choice must be matched by systematic strategic planning 

and management to translate it into national and enterprise 

practices. 

2_Knowledge and experience of the 

marketplace is critical 

It is vital to correctly understand the meaning of “Made in China”. The 

past 30 years have been a continual learning process. Chinese > 

continued page 13


Photo: Mathias Hofstetter 

Original equipment manufacturers still dominate China’s exports 

Leveraging the country’s traditional low-cost base advantage, Chinese manufacturers have won significant global market share over the past 30 years. 

But “Made in China” is at a crossroads. Despite growing penetration from high-tech products, 90% of Chinese product exports are dependent on the processing 

trade or original equipment manufacturers (OEMs). The challenge is to build on these undoubted strengths in order to capture the value added.


China’s textile challenge: 

Climbing the value chain 

China has become the dominant global player in textile and apparel 

production, leveraging its cost advantages and large resource base 

to invest in innovation. Its policy of modernizing outdated machinery 

has given the country a leading edge, but now it needs to build 

some domestic and internationally desired brands. 

As anyone who buys clothes, furnishings and 

fabrics will have sensed, the global textile and 

apparel industry has undergone fundamental 

change in the past 20 years. Products have 

become much cheaper, and the range of 

countries producing for export has been in 

constant flux, with China ever more visible on 

textile labels. This trend was driven by two major 

developments: the staggered integration of 

the textile sector into the World Trade Organization 

(WTO) framework (1994–2008) and 

the gradual opening up of the Chinese economy, 

culminating in China joining the WTO. 

Both developments have led to a more integrated 

world economy and increased global 

trade, which soared by almost 300% between 

1990 and 2007 well over USD 1 trillion. Over 

the same period, global trade in textiles jumped 

by 128% to USD 238 billion, while clothing 

trade surged by 219% to USD 345 billion. 

In less than 30 years, China has become 

the dominant player in global textile and apparel 

production and trade. The bulk of textile 

and apparel imports to the USA and the EU 

now come from China. There are three main 

reasons for this success. China, as one of the 

largest cotton-producing countries, had a solpacted. 

Around 95% of all new machinery was 

destined for Asia. Within Asia, China absorbed 

almost half of new spinning machines. 

China also accounted for by far the major 

part of global investments in other textile machinery 

segments. In weaving, China took twothirds 

of all the modern looms shipped last 

year. India, Bangladesh, Vietnam and Indonesia, 

as well as Brazil, have also been very active 

in the weaving arena. But to give a sense 

of the scale of its commitment, China added 

ten times more looms than India last year, and 

half again as many spindles. 

Focusing on energy efficiency 

Christian Schindler, Director General, ITMF 

Helen Chen, China Representative, Beijing Rep Office, Esquel Group 

id resource base from which to extend to 

downstream textile and apparel manufacturing 

industries. China’s cost advantages in labor 

and other resources allowed apparel buyers to 

move production and sourcing offshore. Finally, 

Hong Kong and Chinese entrepreneurs 

leveraged these advantages and invested aggressively 

in the Chinese textile and apparel 

industry to consistently improve products. 

Modernizing outdated machinery 

These achievements were made possible by 

modernizing outdated textile machinery, in order 

to make best use of China’s comparative 

advantages – mainly low labor and energy 

costs, favorable financing conditions, good infrastructure, 

an integrated textile value chain 

and ready availability of raw materials (cotton, 

silk and man-made fibers). The enormous 

scale of this investment in new machinery is 

evident from machinery shipments into China 

by producers around the world. 

The chart on page 15 shows the increase 

in shipments of spindles used to produce yarn 

this decade. In the five years from 2002 to 

2007, shipments climbed by 260%, only to fall 

by a third last year as the financial crisis im- 

Christian Schindler joined the Zurich-based International Textile Manufacturers Federation in 2004, becoming 

Director General in January 2007. He obtained his doctorate at the Institute for Economic Policy at the 

University of Cologne, Germany. Helen Chen is Chief Representative at the Beijing Representative Office 

of the Esquel Group, a major diversified textile and apparel manufacturer, based in Hong Kong, with production 

facilities throughout Asia, and a network of branches servicing key markets worldwide. Esquel 

manufactures for brands like Tommy Hilfiger, Hugo Boss and Nike, and retailers such as Marks & Spencer. 

In the process of replacing and updating old 

machinery, China also expanded this important 

export industry, focusing more on energyefficient 

and environmentally friendly technology 

along the entire value chain, from fiber 

production via spinning, fabric formation and 

finishing to production of the final garments, 

home textiles and technical textiles. The quality 

of fabrics that can be produced in China 

now matches cloths sourced anywhere in the 

world. Consumer preferences for lower-impact 

environmental technologies are also being 

addresse d. 

The next challenges for the Chinese textile 

industry are the building of domestically and 

internationally desired brands, and the development 

of technical textiles. Brand building 

will require a lot of skill in “soft technologies,” 

market know-how and investment in marketing 

strategies. Technical textiles (mainly applied 

outside traditional apparel and home textile 

segments) will require more research and 

development activity. 

The Chinese economic stimulus plan includes 

textiles as one of the country’s pillar 

industries, and explicitly supports efforts to 

move further up the value chain. The government 

has targeted R&D at domestic machinery 

building, and is facilitating industry consolidation 

to drive the industry to add more value to 

its final products. Export credit guarantees 

and loans to SMEs are included in the package, 

though to date the uptake of these new 

funds has been limited. This could mean the 

revival of international trade in the wake of the 

credit crisis has allowed Chinese firms to stick 

with their established credit providers. All the 

same, the government is clearly encouraging 

larger firms to issue bonds and raise capital 

for mergers and acquisitions. As producers 

consolidate, company resources for brandbuilding 

will multiply, so shoppers can eventually 

expect to see Chinese own-brand labels 

arriving in stores around the world.


continued from page 10 

> 

enterprises moving from the planned economy to the market 

economy lack not only the products with independent intellectual 

property rights, but also business knowledge and experience in 

global markets. In order to develop an economy driven by domestic 

demand, what Chinese enterprises need to strengthen most is 

their capability to open and run domestic marketing and distribution 

channels. We don’t just need high-tech manufacturing, but 

also the labor-intensive industries surrounding retailing. 

3_A “soft” environment will support 

and protect creativity 

We need to create a “soft technology” environment suitable for stimulating, 

exerting and protecting creativity. “Soft environment” refers 

to the institutional, cultural, market, and international and domestic 

environments, as well as other intangible infrastructure. Correlative 

institutions, policies, laws and regulations should encourage and 

protect innovation (including intellectual property law). 

The institution alone is not a panacea, as not-very-effective 

antipiracy campaigns have shown. A culture of creation must be 

fostered, along with a culture of respect for knowledge and an atmosphere 

of innovation, to respect others’ and one’s own IP rights. 

It is just as necessary to firmly resist influences which are not conducive 

to innovative culture, such as being eager to make money 

quickly without hard work, imitation, copying, even plagiarism. Other 

negatives to avoid are an erratic style of study, erosion of respect 

for business in academia, and certain scholars aiming at obtaining 

official careers as soon as they earn the slightest achievements. 

4_The value added will come from 

soft-technology industries 

The trend in the 21st century is toward overall industrial “softening,” 

driven by the migration and transformation of value-added centers, 

global technological changes from hard to soft technology and changes 

in business models. Sources of value added are increasingly arising 

from the soft-technology industry (patent, branding, market ing 

etc.). From the employment perspective, China will have 300–400 

million members of its rural labor force needing to be integrated into 

the economy over the next 20–30 years, and their employ ment opportunities 

cannot be only in labor-intensive manufacturing. There 

are more opportunities in soft-technology industries, including the 

service industries. However, looking at the ten major industries where 

the government is encouraging special focus, China still puts the vast 

majority of its energy, funding and policy input into hard technology. 

This industry selection is derived from the share of current GDP, 

rather than looking more to the emerging service sectors. 

5_Implementation capacity is key to 

soft-technology innovation 

Zhouying Jin is Director at the Center of 

Technolo gy Innovation & Strategy Studies, 

Chinese Academ y of Social Sciences in 

Beijin g. Prior to that, she was Vice Secretary- 

General and Director of the Training and 

Consul ting Department for the State Economic 

Committee of China. She is a consultant 

to a number of companies and has written 

books on knowledge management, technology 

innovation and strategy studies. 

Photo: Thomas Eugster 

It is important to improve innovation capability in a broad sense. Chin a 

will be able to move toward “Created in China,” but how long it will 

take will depend on whether or not the right strategic choices can be 

implemented. Our research shows that the essence of the gap between 

the developed countries and less developed ones is their 

adaptability and innovation in the soft-technology environment. Although 

soft technology is an innovative tool and instrument of hard 

technology, we have overemphasized innovation in science and 

technolo gy for a long time, and neglected soft innovation. IBM provides 

the best example of soft-technological innovation, where it 

interpenetrates the entire manufacturing process from production >



Innovation will unleash creativity 

The strategic ambition is to make “Created in China” as familiar as “Made in China.” But effecting this transformation requires greater innovation capability 

across the entire country. China will have to reform its business environment, industrial mechanisms and training regime to encourage innovation 

and the talents that must provide it. These things cannot be leapfrogged. Time and effort will be needed to build the foundations of a creative economy.


> 

and marketing to servicing, and all the operating processes from 

R & D, supply chain, purchasing, distribution, financing, information, 

network and flow to collaboration, so as to make soft factors create 

more than 50% of company-wide value added. 

6_“Created in China” must become 

a global symbol 

We should renew and build up the global reputation of “Made in 

Chin a,” extending it to “Created in China,” and making it a symbol of 

good quality, practicality, security and value. More importantly, in 

order to establish credibility across the world, we should encourage 

enterprises to carry out programs on economic, social and environmental 

responsibility as their new corporate culture and values, 

and to adhere to green business models. We should implement the 

Chines e govern ment’s “Scientific Outlook on Development” in enterprise 

behavior. 

7_Systematic solutions should be 

reflec ted at the industrial level 

Take manufacturing industry. It is necessary to put efforts into industrial 

policy (soft environment), capabilities of service innovation (soft 

technology), business model innovation and globalized operations, 

convergence with international standards, corporate responsibility 

and corporate culture. Furthermore, we must give priority to the 

equipment manufacturing industry, which is the basic industry of the 

“Made in China” model, as well as the basis for “Created in China.” The 

success of “Made in Japan” is inseparable from its success in industrial 

robot technology. 

8_In short 

In short, moving from “Made in China” to “Created in China” is not a 

transformation that can be undertaken in a day. We must put time 

and effort into its foundations, and implement innovations in many 

directions, simultaneously. 

 

Asia dominates textile 

machinery shipments 

Analysis of shipments of short-staple 

spindles by destination market, 2000 to 

2008, reveals that in 2002 to 2007, 

shipments climbed by 260%, only to fall 

by one-third in 2008 as the financia l 

crisi s hit. Around 95% of new machinery 

was destined for Asian markets. 

6 m 

6 m 

2000 2001 2002 

2003 2004 2005 

6 m 

2006 2007 2008 

World Asia China India Pakistan 

Europe Turkey Americas Africa 

Source: ITMF


“The established order 

is ripe for disruption at 

the moment” 

Wealth and expertise are no longer the preserve of developed 

world brands. An increasingly confident breed of 

emerging market company is focusing on building brands 

in its own way, says Melanie McShane, brand strategist 

of Wolff Olins. 

James Gavin, business journalist 

James Gavin: What are the key drivers 

behind the rise of the emerging market 

brand? 

Melanie McShane: What we are seeing 

now is that wealth and expertise is increasingly 

found inside companies from 

emerging markets. Developed world 

brands don’t know those markets as well, 

but that is not the only barrier to their success. 

There are also issues to do with innovating 

effectively. It’s even harder to 

innovate if they are in markets that are 

growing very fast but that they don’t know 

as well. It’s not just a case of a rebalancing 

world order, there’s actually an 

emerging confidence from these markets, 

wanting to do their own thing in their own 

way. In some ways the established order is 

ripe for disruption at the moment and 

there is a new definition of what “going 

global” means. For many of these firms, 

going global doesn’t just mean going off 

and cracking the USA and Europe. 

What is it about Asia that brands are so 

eager to be the number one there? 

Melanie McShane: Asia’s a fantastic 

testing ground. If a business or a brand 

can succeed in that multifaceted set of 

markets, it’s got an adaptability that it can 

translate to other parts of the world. We 

are also seeing that companies that are 

number one in Asia and have very large 

global ambitions are taking a very sophisti- 

cated approach to branding. Fast Retailing 

Group, owners of the Japanese casual 

wear brand Uniqlo, is an example I’d pick 

out. They are now adopting a multibrand 

strategy in order to achieve their ambition 

of becoming the world’s number one 

apparel retailer group. 

So is Asia becoming a test bed for other 

regions? 

Melanie McShane: What is very interesting 

is getting the interplay between 

regions that have strong emerging markets. 

Take Mexico’s Grupo Bimbo, a successful 

baked goods company. It sees its continued 

growth predicated on expansion 

into China, rather than other regions. I’d 

also pick out Brazilian aircraft manufacturer 

Embraer, which has taken a unique 

approach within its sector, unfettered 

by category conventions. It’s doing a lot of 

interesting work in trying to stimulate the 

Indian market. 

Are Western companies targeting 

Asia first and then tailoring their brands for 

other markets? 

Melanie McShane: There is going to be 

a real temptation for some brands to do 

that, to go where the growth is. But certainly 

the smartest brands, rather than 

trying to gather tons of consumer insights, 

are taking an approach of looking at what 

they and the brand stand for, and then 

innovating from that platform. Mercedes- 

Benz is an example of a company that has 

successfully developed interesting services 

using brand-led innovation. 

How well adapted are Western brand 

strategies for these emerging markets? 

Melanie McShane: It all revolves 

around competition, but this is becoming a 

bit of an old-world concept, a peculiarly 

Western concept of stealing market share. 

We’re seeing more sophisticated brands 

and businesses moving away from the language 

of competition and much more into 

the area of collaboration. Look at the success 

of VW in the Chinese market, which 

is down to its work with the Shanghai 

Automo tive Industry Corporation. We’ve 

seen instances of brands within the finance 

sector where it’s been done very well, such 

as HSBC’s Islamic finance unit Amanah. 

This draws on the bank’s strengths and 

exper tise but offers something different 

that feels authentic. 

Are there real differences in brand perceptions 

between emerging market consumers 

and traditional industrialized countries’? 

Melanie McShane: It’s much more 

subtle than a desire for status symbols 

which is how these markets are often 

characterized. There’s a great deal of pride 

and optimism within these markets, and 

much less cynicism. People don’t feel they 

are being sold at. That entrepreneurial 

spirit and lack of fear makes for some really 

exciting brands. 

What preconditions are there for an 

emerging brand to be successful in industrialized 

countries? 

Melanie McShane: The fundamental 

thing from a brand perspective is retaining 

that sense of identity wherever you come 

from. Geography can be important, but 

your sense of identity or purpose as a 

company is fundamental, as it’s something 

that can’t be copied. There are many businesses 

that know what they do, but great 

brands know why they are in business and 

that gives them a platform to expand way 

beyond what they originally operated on. 

Melanie McShane is a strategist at global brand 

consultan cy Wolff Olins, helping organizations to 

use branding to think differently and grow. Clients 

include the Asian Development Bank, Unilever, 

PricewaterhouseCoopers, Booz & Company, Royal 

Mail and Amnesty International. She is a speaker 

on brands and regularly contributes to the press.


Demographic 

challenge 

People are now living longer, as they benefit from better health care and greater prosperity than 

their parents and grandparents. An aging population presents opportunities to cater for a whole 

new group of older consumers eager to make more imaginative use of their time. But are we doing 

enough to prepare for the challenges this demographic shift brings? 

Ilona Kickbusch, Graduate Institute of International and Development Studies, Geneva 

Prisca Boxler, World Demographic & Ageing Forum, St. Gallen 

“Old age is like everything else. 

To make a success of it, you’ve got to start young.” 

Fred Astaire 

Public health improvements and greater wealth mean many of us are 

living longer. The resulting demographic change, which will be accentuated 

over coming decades, presents both challenges and opportunities 

for the world’s economic and social development. Population 

aging will impact all aspects of 21st-century society, but it 

seems that we have not yet envisaged how societies can be reorganized 

to meet that challenge. According to the United Nations, a key 

priority for our future is to ensure that people everywhere are able 

to age with security and dignity, and to continue participating in society 

as citizens with full rights. 

The number of people aged 60 and over is expected to rise from 

around 600 million in 2000 to 1.2 billion in 2025 and 2 billion in 

2050. Today, about two-thirds of all older people live in the devel- 

oping world; by 2025, this figure will be three-quarters. At the 

same time, the fastest-growing population group in the developed 

world is over 80 years old, and because women outlive men in virtually 

all societies, women constitute the majority in this age group 

at a ratio of 2:1. One of the most intriguing issues about the data 

and trends on aging is that, while the evidence is there, most key 

actors in society have not yet responded to it. This applies to politicians 

as much as companies and of course individuals themselves. 

In Switzerland, the World Demographic & Ageing Forum believes 

that addressing this challenge requires serious effort and cooperation 

not just from the public sector, but from all stakeholders. 

This is not just a national issue. Policy strategies and papers at 

the regional (e.g. EU) and global levels do not really face the >

15 – 64 

0 – 14 

> 64 

1975 

4 % 

40 % 

56 % 

15 – 64 

0 – 14 

> 64 

2025 

10 % 

22.5 % 

67.5 % 

Source: World Population Prospects: The 2008 Revision. United Nations. 

Asia 

15 – 64 

0 – 14 

15 – 64 

> 64 

0 – 14 

> 64 

1975 

2025 

South America 

39.5 % 

56 % 

4.5 % 

21 % 

11 % 

68 % 

Africa 

Asia 

Europe 

South 

America 

North 

America 

1975 

419 m 

2025 

1,400 m 

Africa 

1975 

2,379 m 

15 – 64 

Europe 

0 – 14 

1975 

676 m 

2025 

729 m 

> 64 

1975 

11.5 % 

23.5 % 

1975 

215 m 

2025 

445 m 

65 % 

North America 

1975 

242 m 

2025 

398 m 

15 – 64 

0 – 14 

0 – 14 

15 – 64 

> 64 

> 64 

1975 

2025 

3 % 

4 % 

45 % 

52 % 

Population growth 1975 – 2025 

2025 

4,773 m 

36 % 

60 % 

0 – 14 

15 – 64 

> 64 

Across the world, a similar trend is playing out: people are getting older, but at different speeds. In Asia, the proportion of people under the age of 14 

is set to decline from 40% in 1975 to 22.5% by 2025. In Africa, however, the trend is less marked; the proportion of over-64-year-olds is forecast to rise 

by only 1% over the 50-year period. 

15 – 64 

0 – 14 

> 64 

2025 

15 % 

21 % 

64 % 

15 – 64 

0 – 14 

> 64 

1975 

2025 

25 % 

64.5 % 

10.5 % 

18 % 

18.5 % 

63.5 %


demographic challenge in all its dimensions. This lack of awareness 

in the political agenda is largely because, at the personal 

level, we consider aging to be an asset and everyone 

wants to live a long and healthy life, but, at the political 

level, aging is turned into a deficit model and is closely 

associated with expensive health care, economic inefficiency 

and intergenerational conflicts. This, of course, 

reflects how modern societies, with their complex social 

security systems and social infrastructures, are at a loss 

in dealing with the impact of a trend that brings high levels 

of uncertainty with it. For example: will the trend of “healthy 

aging” continue, meaning that not only do we live longer, 

but that our healthy life expectancy increases significantly? 

Will companies and employees find a consensus as to the 

length of working life? Will society be willing to accept a 

later retirement age in view of the fact that many trade 

unions still consider early retirement a key social right, despite 

totally changed societal contexts? The list of political 

challenges is long – and most politicians fear making proposals 

that leave the most important part of their electorates with 

the impression that the quality of their life will be reduced. 

Photo: Hans Schürmann 

Baby boomers thinking 

Even those making well-meaning proposals tend to forget that 

no societal group is more differentiated than “the elderly.” In the 

heads of many decision-makers (irrespective of their own age, 

because, psychologically, the older person is always the other) 

aging is still associated with passivity, ill health, dependency and 

loss of intellectual capacity and creativity. However, a key factor 

to keep in mind is that aging is currently being redefined by a 

group that has already affected a significant change in society: in 

developed economies the so-called “baby boomers” — those individuals 

born between 1946 and 1964, who will make up a large 

proportion of those over 60 by 2030. 

These baby boomers have changed how we think and how we 

live. They have redefined trends and values and challenged the 

norms, standards and practices of modern society through their 

political, social or economic behavior and viewpoints: be it their 

legendary “antiwar” or “free love” movements in the 1960s, or the 

professional integration of women. Just as they have redefined social 

concepts like family life, they are now in the process of redefining 

aging. 

They are the first generation to age with a high level of health 

and education, and with significant economic security. This allows 

them to experiment and “do it their way,” and they are forging new 

ground as they go. Who would have thought in the 1960s that the 

Rolling Stones would still be touring 40 years later, or that the 

audiences of many rock concerts would be well into their sixties! 

Who would have thought that the sale of electric guitars would 

peak in Japan when the first baby boomers started to retire. Nobody 

could have imagined the Internet, but who would have thought 

that the largest group using Internet dating would be people over 

50? Owing to the high percentage of the population it represents, 

this group is challenging notions of retirement and, even more, the 

perception of “being old.” They run marathons, go bungee jumping, 

go out in the evening, work as volunteers – in short, they are visible 

and they are active. 

This generation grew up comfortably with a consumption-based 

lifestyle that, because of their high purchasing power, they are > 

Prisca Boxler is Program and Managing 

Director of the World Demographic & Ageing 

Forum (WDA Forum), a non-profit organization 

based in St. Gallen, Switzerland, where she 

coordinates the organization’s activities. 

Ilona Kickbusch is the Director of the Global 

Health Programme at the Graduate Institute 

of International and Development Studies, 

Geneva. She advises organizations, government 

agencies and the private sector on 

health promotion strategies.


Aging trend is an issue 

for the whole world, 

but at different speeds 

The developed world is in the middle 

of a seismic demographic shift. By 2050, 

the number of people in Japan over 

60 years old will almost equal the population 

in the 15–59 range. Other Western 

countries are faced with the same aging 

trend, albeit less pronounced. Even developing 

countries such as India will have 

to deal with the far-reaching consequences 

eventually. This is a truly global issue. 

0–14 

15–59 

60+ 

80+ 

0–14 

15–59 

60+ 

80+ 

0–14 

15–59 

60+ 

80+ 

0–14 

15–59 

60+ 

80+ 

0–14 

15–59 

60+ 

80+ 

India 

2005 

2050 

Japan 

2005 

2050 

USA 

2005 

373,104 (33%) 

673,848 (59.6%) 

84,796 (7.5%) 

7,914 (0.7%) 

293,712 (18.2%) 

325,988 (20.2%) 

50,028 (3.1%) 

17,715 (13.9%) 

76,087 (59.7%) 

33,647 (26.4%) 

6,118 (4.8%) 

11,487 (11.3%) 

45,543 (44.8%) 

44,730 (44%) 

15,757 (15.5%) 

62,970 (20.8%) 

50,255 (16.6%) 

10,596 (3.5%) 

994,101 (61.6%) 

189,516 (62.6%) 

able to continue. Thus, whereas earlier generations would refrain 

from spending their hard-earned money in old age, today’s retirees 

are active, go traveling, renovate their houses and buy luxury cars. 

Consequently, it comes as no surprise that the average age of a 

Porsche buyer is 58. Being above 60 no longer means looking, 

behaving and acting in the image of a grandparent of yesteryear. 

Rather, instead of simply adapting their services and products to 

this newly discovered consumer group, many commercial services 

and industries are creating and redefining “age” as sexy, inventing 

euphemisms for “old” and making it easy for the older consumer to 

identify with the concept of the “young old.” Much of this change in 

mindset is manifested in the so-called “woopies” (well-off old people) 

or “best agers.” 

The adventurous old 

Nevertheless, today’s and tomorrow’s retirees are more than just 

the ’68 generation. They are selective consumers with several decades 

of consumer experience: not only do they know what they 

want, what quality they strive for, and what price they are willing to 

pay, but, most importantly, they can afford to be selective. They are 

also creative and innovative – marketing companies need to realize 

that not only the young are trendsetters or willing to try new things. 

An increasing number of older people are very open to technological 

change and willing to use and test all kinds of new gadgets that will 

make their life easier and keep them independent. This will also 

apply increasingly to health, and it is the older generation – often 

living with one or more chronic ailments – who will want to manage 

their own care for as long as possible in order to continue living at 

home and remain integrated in the community. 

Thus we are faced with a seminal change in our societies; we 

must start to imagine social solidarity and cooperation between 

young and old, rich and poor, and healthy and ailing populations in 

new ways. No society has yet had to deal with all three combinations 

at the same time, so our health and social security systems 

will have to be dramatically revamped. In doing so, we need to remember 

this is not about “them” – older people – this is about “us”– 

the whole of society. Nitin Desai, Special Advisor to the Secretary- 

General of the United Nations, has expressed this forcefully in the 

foreword to the World Aging Situation 2000: “We are all constituents 

of an aging society, rural and city dwellers, public and private 

sector identities, families and individuals, old and young alike. It is 

crucial that societies adjust to this human paradigm as record numbers 

of people live into very old age, if we are to move towards a 

society for all ages. Let us continue the dialogue and build on partnerships 

that can bring us closer to a society that weaves all ages 

into the larger human community in which we thrive.” 

0–14 

15–59 

60+ 

80+ 

2050 

69,880 (17.3%) 

226,202 (56%) 

108,254 (26.8%) 

30,699 (7.6%) 

Source: World Population Prospects: The 2006 Revision, Highlights. United Nations. 




Averting future 

food shortages 

Biotechnology innovations can boost the productivity of agriculture and water, and help provide food 

security in developing countries. However, the reluctance to apply the technology in parts of the 

high-income countries, due to consumers preferences and misgivings over safety, is creating delays 

in its utilization that may prove costly for the poor. 

Joachim von Braun, Director General, International Food Policy Research Institute (IFPRI) 

Global food policy finds itself between a rock and a hard place. The 

world, and poor people in particular, need more and better food, 

that is more healthy staple foods, and new biotechnologies offer 

opportunities to address this problem. But political and societal 

concerns – especially in rich countries – constrain the use of this 

option, so investments in innovative technology remain low. 

The world has been buffeted by a serious food crisis since 2007. 

High food prices severely undermine agricultural sustainability and 

food security, especially in developing countries. As prices in many 

countries remain high and volatile and the global recession poses 

additional threats, creative and sustainable solutions for overcoming 

the crisis are needed. As a result, there is renewed interest in 

re-examining the role of genetically modified crops in ensuring 

food security. Indeed, biotechnology has large potential to increase 

agricultural productivity and the nutritional value of food, as well as 

reduce environmental degradation. Yet, biotechnology also faces 

strong opposition. While wider adoption of genetically modified 

crops is not a panacea for solving the food crisis, together with 

appropriate market and trade policies, social safety nets and direct 

nutrition action, it is part of a comprehensive food security policy. 

The food crisis takes its toll 

In response to the food price spike in 2007–2008, poor households 

reduced the quantity and quality of their diets and cut back on 

spending for goods and services essential for their well-being. 1 The 

global financial crisis and recession that hit in 2008–2009 increased 

the burden on the most vulnerable as incomes shrank, 

jobs were lost, remittances declined and credit dwindled. As a result, 

the Food and Agriculture Organization of the United Nations 

estimates that the number of hungry people in developing countries 

will increase from 848 million in 2003–2005 to 1,020 million in 

2009. 2 Given the slow agricultural response, food prices remain 

high and volatile, and food shortages persist. In 2008, cereal output 

in developing countries grew by less than 1%. In Ethiopia, Kenya 

and Uganda, maize prices in June 2009 were two times higher 

than their levels two years before; in Burkina Faso and Niger, rice 

prices were 50% higher. 

The growth and sustainability of food production is hampered 

by land and water constraints, as well as pressure on natural resources 

from climate change. Worldwide, only 12% or less of available 

arable land is not forested or subject to erosion and desertification. 

3 Water scarcity in developing countries also impairs food 

production. Many developed water sources are almost fully utilized, 

and supply needs to rise by at least a third by 2030 to support 

agriculture. 4 In the context of the food crisis, increased competition 

for land and water combined with distrust in global market functioning 

have led to foreign land acquisition in a number of developing 

countries. 5 

The food crisis has revealed the challenge of feeding the world’s 

growing population. Food production would have to double to overcome 

existing hunger, feed an additional 2.5 billion people by 2050, 

and accommodate rising demand due to income growth. Substantial 

crop and livestock productivity growth is critical for a sustainable 

increase in agricultural output. Yet, yields and total factor > 

continued page 23


Growth potential 

Crop production figures for 2007 show that for those 

region s where biotechnology-assisted breeding is most 

in use, such as North America, the yields are at highest. 

But other factors like machine usage (e.g. number of 

tractor s), irrigation or average farm size are also important 

for productivity as shown by Europe. 

Old and new techniques 

combine in plant breeding 

Since ancient times, mankind has developed new plant types by using techniques 

such as grafting and the creation of hybrids. Modern versions of 

these techniques still have much to offer, either as an alternative to genetic 

modification (GM) or as a complement to it. 

Northern America 

94,225 Hg/Ha 

80,919 Hg/Ha 

25,917 Hg/Ha 

Wolfgang Friedt, Vice-Dean, University of Giessen 

Conventional plant breeding has demonstrated 

its potential to increase crop yields by enhancing 

the resistance of crops to abiotic and 

biotic stress. In the 20th century, the grain 

yield potential of major cereals such as wheat 

was increased about tenfold. Simultaneously, 

the nutritional value of food and feed has been 

greatly improved to meet the needs of farm 

animals and human consumers. 

Modern plant breeding can call on many 

methods and techniques. In addition to classical 

methods based on quantitative genetics, 

biotechnology – both GM and non-GM – is 

widely used in breeding today. For example, 

it can be used to create and broaden genetic 

variation in crop plants, enhance the development 

of homozygous lines, or efficiently develop 

novel cultivars such as hybrids. 

Biotechnology steps that do not involve GM 

technology are still far from being fully exploited. 

Techniques such as cell fusion or embryo 

rescue continue to have high potential 

for creating novel interspecific and even intergeneric 

hybrids for extending genetic variation 

in crops and exploiting alien germplasm. They 

can be used to develop new cultivars that are 

pathogen and stress-resistant, possess high 

nutrient efficiency (e.g. through nitrogen and 

phosphorus), and deliver superior product 

quality. Furthermore, suitable hybrid systems, 

involving male sterility and restoration traits, 

offer excellent opportunities for a further productivity 

boost by growing highly vigorous hybrid 

cultivars. 

In addition, the breeding process and its 

output in terms of improved varieties will be 

promoted strongly by the advance of genome 

analysis and the genetic understanding of 

quantitative traits, such as stress resistance 

and agricultural yield. Previously, molecular 

markers and mapping approaches have been 

widely used to localize agronomically important 

genes in plant genomes. Today, molecular 

markers widely assist the breeding and selection 

procedures of crop plants, including 

cereals, oil and protein crops, root and tuber 

crops, as well as fruit and vegetable plants. 

Recent technological innovations in the fields 

of genome sequencing and expression analysis 

are currently driving rapid progress in 

structural and functional genome analysis. 

This is expected to soon reveal the workings 

of quantitative traits not yet understood, such 

as yield; for example, the function of so-called 

quantitative trait loci (QTL) will be unraveled. 

Such basic knowledge will open new and 

highly efficient ways of genome-based selection, 

partly replacing classical phenotypic selection 

for complex agricultural traits. 

Overall, biotechnology-assisted breeding, 

including breeding using GM-based approaches, 

is expected to continuously improve crop 

varieties to meet the demands of a growing 

world population. 

Wolfgang Friedt is Vice-Dean (Research) at the Faculty 

of Agriculture, Nutrition & Environment of the 

University of Giessen, Germany. He also chairs the 

Scientific Board of the Julius Kühn Institute in the 

Federal Center for Plant Research, Quedlinburg. He 

has published extensively on the latest developments 

in plant research. 

43,058 Hg/Ha 

17,074 Hg/Ha 

51,888 Hg/Ha 

Asia 

Africa 

Europe 

43,100 Hg/Ha 

28,857 Hg/Ha 

23,530 Hg/Ha 

59,396 Hg/Ha 

19,943 Hg/Ha 

33,787 Hg/Ha 

Maize Rice/Paddy Wheat 

Hg/Ha = hectogram/hectare 

Source: Food and Agriculture Organization, Credit Suisse


Photo: Thomas Eugster 

continued from page 21 

productivity growth in many regions remain too low. In the past, 

technological breakthroughs adopted on a large scale have been 

highly beneficial and have been critical in preventing Malthusian 

predictions of population growth outpacing agricultural production 

being realized. Biotechnology is not a single technology, but rather 

a set of technologies. It offers opportunities to boost agricultural 

productivity, enhance the nutritional value of food and increase 

crop yields, as well as improve resistance to disease, pests, drought 

and extreme weather conditions. Biofortified crops – new varieties 

of staples that are richer in micronutrients – could allow the poor to 

receive the necessary amounts of vitamin A, zinc and iron via their 

regular staple foods. Genetically modified crops can also benefit 

the environment through the development of varieties requiring 

minimal use of pesticides and herbicides, and not requiring mechanical 

tilling. 

According to the World Health Organization, existing genetically 

modified foods “are not likely to present risks for human health.” All 

the same, opposition to genetically modified crops persists. Import 

bans by the European Union on genetically modified crops present 

a dilemma for policymakers in developing countries regarding adoption 

and production levels. In 2008, about 12.3 million farmers in 15 

developing countries grew biotech crops, 6 but they represent only a 

small fraction of all farmers in developing countries. 

The alleged risks of genetically modified crops should be weighed 

against the risks of non-adoption. Policy simulations show that the 

adoption of biotech crops in developing countries, such as India, 

Bangladesh, Indonesia and the Philippines, could generate large 

potential gains which greatly exceed the trade losses these countries 

may face due to import barriers. 7 The rejection of genetically 

modified foods leads to negative externalities that hurt the poor. 

Global science and technology initiative needed 

A global science and technology initiative is needed to respond to 

the risks posed by the global food crisis and economic recession, 

and to prepare for future challenges. Its agenda should center on 

increasing agricultural productivity and include biosafety. There 

should be a clear focus on the poor and food-insecure. The proposed 

science and technology initiative should include strategies 

to increase investments in research and development, and explore 

the potential of high-impact technologies. To ensure adoption of 

technology by smallholders, increased investment in the foundations 

of technology utilization, such as rural education, infrastructure 

and extension services, is needed. 

To support this initiative, appropriate biosafety policy and regulation 

are needed to manage the risks that could arise from the 

adoption of biotechnology. Existing regulatory systems across countries 

vary widely due to different scientific assessments and perceptions 

of the importance of socioeconomic risks. Although new 

biosafety laws, policies and regulations are being compiled in many 

developing countries, more needs to be done. Cross-border learning 

and harmonization of policies at the regional and global level 

have become imperative to cut the costs of regulation and movement 

of genetically modified foods across borders. These policies 

should be accompanied by improved information for consumers 

through labeling and improved dissemination. A further delay in 

moving forward with genetically modified crops in developing country 

agriculture will further increase global food insecurity for the 

poor. Industrialized countries should use their scientific and technological 

capacities to ensure this delay does not take place. 

Joachim von Braun has been Director 

General of the International Food Policy 

Research Institute (IFPRI) since 2002, 

overseeing the Institute’s efforts to provide 

sustainable solutions for ending hunger 

and malnutrition. Under his guidance, IFPRI 

has expanded its teams based in Africa, 

Asia and Latin America in response to 

research challenges and partners’ needs. 

He has published widely on food security, 

health, nutrition and agricultural change. 



1 von Braun, Joachim. “Food and financial crises: Implications for agriculture and the poor.” 

Food policy reports 20. International Food Policy Research Institute. Washington, DC, 2008. 

2 FAO (Food and Agriculture Organization of the UN). “More people than ever are victims of hunger.” Press 

release, June 19, 2009. FAO. “State of food insecurity in the world 2008.” Rome, 2008. 

3 Thompson, Robert. “Malthus Has Been Wrong for Two Centuries, but Will He Be in the 21st ? 

Agricultural Research Holds the Key.” 2009. Available at: www.ciber.uiuc.edu/aspx/jacs/ 

Presentations/Thompson_rev.pdf. 

4 Global Economic Symposium. “The crisis of water management.” GES 2008 session handout. 

Schleswig-Holstein, Germany, 2008. 

5 von Braun, Joachim and Ruth Suseela Meizen-Dick. “Land grabbing by foreign investors in developing 

countries: Risks and opportunities.” IFPRI Policy Brief 13. International Food Policy Research Institute. 

Washington, DC, 2009. 

6 Clive, James. “Global status of commercialized biotech/GM crops: 2008.” ISAAA Briefs 39-2008: 

International Service for the Acquisition of Agri-biotech Applications (ISAAA). Ithaca, NY 2008. 

7 Gruere, Guillaime. “Should Asian countries adopt GM crops despite trade regulations? A policy 

simulation in India, Bangladesh, Indonesia, and the Philippines.” Program for Biosafety Systems brief 

13. IFPRI, Washington, D.C. 2009.


Photos: Thomas Eugster, BRIDGEMANART.COM, UNIVERSAL/Kobal Collection, SSPL/Science Museum | Source timeline: UsedRobots.com 

1772 

Swiss inventor Pierre 

Jaquet-Droz builds 

a robotic child called 

“The Writer,” which can 

produce messages 

of up to 40 characters. 

Robotics 

and artificial 

intelligence 

timeline 

1801 

Joseph Jacquard invents 

a programmable 

weaving loom operated 

by punch cards, radically 

simplifying the weaving 

of patterned fabrics now 

known as “Jacquard.” 

1495 

The anthrobot, a mechanical 

man, is designed by 

Leonardo da Vinci. The 

robo t is drawn as a knight, 

wearing contemporary 

Italia n-German armor. It 

was designed to be able to 

walk, stand and sit, open 

and close its mouth, move 

its head from side to side, 

and raise its arms. 

Rolf Pfeifer: “If one wants to build robots to live with us outside the factory walls, those robots must master the full panoply of human behavior, 

and only out in the wider world does it become evident what it takes to do that.”


Science or 

science fiction? 

Robots and automated machines are already part of our everyday lives, providing huge benefits 

in fields from medicine to transportation and manufacturing. But, says Rolf Pfeifer, Professor at the 

University of Zurich’s Department of Informatics, many challenges lie ahead if robots are to 

emulate humans, given the complexities of our own species. 

Rolf Pfeifer, Professor at the Department of Informatics, University of Zurich 

1818 

Mary Shelley publishes 

“Frankenstein,” written 

after a challenge from 

Lord Byron to compose 

a supernatural tale. 

1832 

Charles Babbage develops 

the principles 

of the “Analytical 

Engin e” – the world’s 

first computer. 

Reports about robots appear in the media almost every day – stories 

about robot “waiters” or vacuum cleaners, exoskeleton suits that 

give paraplegics the ability to walk again, hand prostheses that can 

be controlled by the power of imagination, wheelchairs that respond 

to brain waves, and “surgical assistants” (micromanipulators) for 

minimally invasive, high-precision operations. 

Even though some of these scenarios might arouse skepticism, 

most people agree that this kind of technology potentially poses 

tremendous benefits for the quality of life, the environment and 

society in general. Robots can be deployed wherever the task at 

hand is dangerous or unpleasant for humans. They can be used to 

permanently and flexibly monitor environmental conditions, human 

health and the security of buildings, installations, plants and facilities. 

They can also be employed for clean-up operations and janitorial 

tasks, and to help ill or disabled people and the rapidly aging 

population to cope with everyday life. In the year 2011, more than 

18 million robots will populate the earth compared with 7.5 million 

in 2007, according to EU estimates. 

Some of these robot types are prototypes, while some are now 

in daily deployment. And engineers and scientists are already busy 

in their laboratories doing research on the next generation of machines, 

which includes robots that no longer need to be programmed, 

but instead learn like humans through imitation, from 

demonstration or by being told. Or household robots that not only 

tidy up, clean and cook, but also act as actual partners with whom 

people can discuss cares and concerns and share experiences – a 

concept that is being pursued intensively in Japan, for example. 

Sophisticated ways to connect robots directly to the human nervous 

system are also being sought, which could be useful in developing 

new kinds of wheelchairs and prosthetics. Researchers are 

also pressing ahead with robot development in the miniature realm. 

One day, doctors should be able to inject millimeter-sized robotic 

“bacteria” into the human bloodstream to deliver medication to exactly 

the right spot, to unblock an obstructed artery or detect and 

remove cancer cells. 

These developments leave some people wondering where this 

will all lead. What if robots suddenly become more intelligent than 

humans, as certain self-styled technology prophets are trying to 

“prove” using pseudoscientific arguments? What if these machines 

develop consciousness and feelings of superiority, and attempt to 

enslave or exterminate humanity? And what if robot development 

gets out of control and machines start to replicate themselves? 

Today’s limited automatons 

Of course, automated assistants that work for us around the clock 

without our active involvement are nothing new; they have been 

around for a long time in the form of air conditioners, telephone exchanges, 

Internet servers and factory robots that weld motors or fill >


Photos: 20TH Century FOX/Kobal Collection/Digital Domain, SSPL/Science Museum 

1924 

Founded as the Tabulating 

Machine 

Company by Herman 

Hollerith in 1896, the 

company is renamed 

International Business 

Machines (IBM) 

by Thomas J. Watson, 

its new chief executive 

officer. 

1961 

The first industrial 

robot goes online 

in a General Motors 

plant in New 

Jersey, performing 

spot-welding. 

1921 

The term robot enters 

the English language via 

a play in London. 

Coined in 1917 by 

Czech dramatist Karel 

Capek, it derives from 

“robota,” meaning slavelike 

labor. 

1942 

Isaac Asimov publishes 

“Runaround,” a short 

story outlining the “three 

laws of robotics.” 1948 

“Cybernetics,” a seminal 

book on information 

theor y, is published by 

Norbert Wiener. The word 

encompasses “the science 

of control and communication 

in the animal 

and the machine.” 

1890 

Building on Jacquard’s 

loom and Babbage’s 

Analytical Engine, Herman 

Hollerith patents 

an electromechanical 

information machine 

using punched cards. It 

wins the 1890 US 

Census competition. 

Brave new world 

From Leonardo da Vinci’s drawing of a prototype automaton to today’s supercomputers, we have already come a long way in developing robots and artificial 

intelligence. By 2011, we will be using over 18 million robots around the world. But is the world of “I, Robot” now just around the corner?


beer bottles, for example. And, for the performance of many cognitive 

tasks, there have long been machines that vastly outclass us. Most 

people do not even bat an eyelid over the fact that computers are today’s 

chess world champions. Nor does the fact that the trains on 

Paris Métro line 14 run fully automatically without conductors seem to 

bother us much. Why not ? Because the “eco-niche” where the robots 

“live” is extremely simple and permits only a very narrow range of actions. 

In the case of the Métro, for instance, the automated actions are 

limited essentially to accelerating and braking. The assembly floor of a 

factory also permits only a very restrained spectrum of actions, which 

enables everything to be planned, precalculated and optimized. Robots 

can indeed be programmed to perform different assignments, but they 

then execute the task at hand monotonously and identically, albeit with 

supreme speed and efficiency. 

knee injury prevents me from climbing stairs. Faced with the choice 

of having someone carry me up the stairs or taking an elevator, I 

would definitely opt for the elevator. 

Even if developments in robotics advance rapidly, the Japanese 

vision of a robot companion – a dream for some, a nightmare for 

others – is still a long way off. A charter like the one that the South 

Korean government has proposed for the protection of the rights of 

robots, similar to the charters safeguarding the rights of humans 

and animals, also belongs more to the realm of science fiction or 

comedy at the moment. 

 

Real-world challenges 

If one wants to build robots to live with us outside the factory walls, 

those robots must master the full panoply of human behavior, and 

only out in the wider world does it become evident what it takes to 

do that. Likewise, it becomes clear that human intelligence cannot 

simply be portrayed as a computer program – an ingenious body 

with eyes, ears, hands, arms, legs, skin, nerves, muscles etc. is 

needed as well. Since everything changes continually and unpredictably, 

one must be capable of reacting quickly to new situations 

and can only make very limited plans. 

Although the notion of robots populating our day-to-day world 

is a very old one, it is the progress of the last couple of decades 

that has pushed that vision to the verge of becoming reality. And 

that is at least partially attributable to the fact that researchers 

have begun to look for answers in nature, biology and evolution. 

Engineers, computer scientists, neuroscientists, psychologists and 

kinesiologists have teamed up to build intelligent robots in joint collaboration. 

For such robots in the real world, a single isolated technology 

is no longer sufficient; what is required is a confluence of 

numerous technologies that work harmoniously and purposefully 

together. It took evolution millions of years to produce the most 

complex known system in the universe, human beings. For robots, 

technologies are needed for seeing, hearing, touching and inner 

perception, not to mention for an entire locomotor system. Vision 

alone is already an extremely difficult challenge. Just think, for example, 

how different an object can look to us depending on the 

distance, angle and brightness. So far, sensory perception systems 

with even just rudimentary human capabilities are still a futuristic 

vision. The sense of touch is of absolutely essential importance 

for humans and animals. Extremely sensitive pressure and 

temperature sensors in the skin on hands and fingers enable us to 

cognitively sense exactly what we touch. In addition, the skin is 

flexible, movable and extremely rugged. The muscle-tendon system 

also has phenomenal properties with regard to performance 

and energy-efficiency. The properties of the materials involved play 

a central role here. And so we are slowly beginning to understand 

where the difficulties will lie. Hence, it is not surprising that we do 

not have any robots yet that are truly similar to humans. 

Do we really want robot assistants? 

Despite the potentially enormous benefits of robotics technology, 

people have divided opinions about whether, for example, they 

want to be cared for by robots in the future. But is it really so terrible 

to be helped by a machine? Let’s say that a sports-related 

1968 

The film “2001: A Space 

Odyssey,” based on 

Arthu r C. Clarke’s book, 

popularizes the idea 

of a computer, HAL, 

that can see, speak, 

hear and think. 

1986 

NavLab 1 pioneers 

high-performance 

outdoor navigation, 

deploying computers, 

laser scanners and 

color cameras for its 

perception. 

1976 

Robotic arms are used 

on the Viking 1 and 2 

space probes. 

1997 

NASA’s Pathfinder 

lands on Mars and the 

Sojourner rover robot 

captures images from 

the planet’s surface. 

Rolf Pfeifer is a professor at the Department of Informatics and Director of the 

Artificial Intelligence Laboratory at the University of Zurich, Switzerland. His 

research interests include biorobotics, artificial evolution and educational 

technology. He is currently a visiting professor at Jiao Tong University in Shanghai 

from where, this fall term, he will hold the “ShanghAI Lectures,” an experiment 

in global teaching, e-learning and intercultural collaboration, which includes 

video conference and 3D virtual collaborative environments, with approximately 

40 universities around the world participating. He has a Masters degree in 

physics and mathematics and a PhD in computer science from the Swiss Federal 

Institute of Technology.

Photos: Thomas Eugster, Sarbach Fotografie, IEEE Spectrum artits, Keystone/Science Photo Library | Source future timeline: Ray Kurzweil 

2000 

Humanoid robots from 

Honda and Sony are 

presented, along with 

the Aibo robot dog. 

2019 

Automated driving 

systems are now installed 

in most roads. 

People are beginning 

to have relationships 

with automated 

personali ties, using 

them as companions, 

teachers, caretakers 

and lovers. Virtual 

artists, with their own 

reputations, are 

emerg ing in all of 

the arts. 

Into 

the future 

2009 

RIBA (Robot for Interactive 

Body Assistance) 

launched in 

Japan for use in hospitals 

– it can carry 

patients weighing up 

to 60 kg. 

2009 

Pocket-sized reading 

machines for the 

visual ly impaired, 

“listening machines” 

(speech-to-text conversion) 

for the deaf 

and robot orthotic 

devices for paraplegics 

support a growing 

perception that 

disabilities do not 

necessarily impart 

handicaps. 

Ray Kurzweil: “By 2030, a thousand dollars of computation will be about a thousand times more powerful than a human brain. Keep in mind that computers will 

not be organized as discrete objects as they are today. There will be a web of computing deeply integrated into the environment, our bodies and brains.”


“Going beyond 

our limitations” 

Computers whose intelligence far outstrips our own, the virtual reality of the film 

“The Matri x” and tiny robots that travel through our bloodstreams destroying 

pathogens may seem like the stuff of the distant future. But scientist and inventor 

Ray Kurzweil says not only are they coming, but they will be with us soon, as exponential 

growth in computing power changes our lives and, indeed, our very beings. 

2039 

Machines claim to 

be conscious. 

These claims are 

largely accepted. 

2049 

Nano-produced food 

use means availability 

is no longer affected 

by limited resources, 

bad weather etc. 

Nanobot swarm projections 

create visualauditory-tactile 

projections 

of people and 

objects in “real” reality. 

2029 

Permanent or removable 

implants for the 

eyes, like contact 

lenses, are now used 

to interface between 

human users and the 

worldwide computing 

network. 

Automated agents 

are now learning on 

their own, and significant 

knowledge is 

being created by 

machin es without 

human intervention. 

No human employment 

in production, 

agriculture or transportation. 

Basic life 

needs available for 

the vast majority of 

the human race. 

Growing discussion 

about the legal rights 

of computers and 

what constitutes being 

“human.” 



Dr. Kurzweil, you foresee the fusion of 

human and artificial intelligence – how will 

it look? 

Ray Kurzweil: Within a quarter century, 

non-biological intelligence will match the 

range and subtlety of human intelligence. 

It will then soar past it because of the continuing 

acceleration of information-based 

technologies, as well as the ability of machines 

to instantly share their knowledge. 

Intelligent nanorobots will be deeply 

integrated in our bodies, our brains and 

our environment, overcoming pollution and 

poverty, providing vastly extended longevity, 

full-immersion virtual reality incorporating 

all of the senses, as in the film 

“The Matrix,” “experience beaming,” as in 

“Being John Malkovich,” and vastly enhanced 

human intelligence. The result 

will be an intimate merger between the 

technology-creating species and the 

technolo gical evolutionary process it 

spawned. We’ll get to a point where technical 

progress will be so fast that unenhanced 

human intelligence will be unable 

to follow it. 

It seems a key part of your thesis is that 

we will be able to capture the intelligence 

of our brains in a machine. How will we 

achieve that ? 

Ray Kurzweil: We can break this down 

further into hardware and software requirements. 

In my book, “The Singularity is 

Near – When Humans Transcend Biology,” 

I show how we need about ten quadrillion 

(10 16 ) calculations per second (cps) to provide 

a functional equivalent to all the regions 

of the brain. Some estimates are 

lower than this by a factor of 100. Supercomputers 

are already at 100 trillion (10 14 ) 

cps, and will hit 10 16 cps around the end of 

this decade. Several supercomputers with 

one quadrillion cps are already on the 

drawing board, with two Japanese efforts 

targeting ten quadrillion cps around the 

end of the decade. By 2020, ten quadrillion 

cps will be available for around USD 

1,000. Achieving the hardware requirement 

was controversial when my book on this 

topic, “The Age of Spiritual Machines,” 

came out in 1999, but is now pretty much 

of a mainstream view among informed 

obser vers. Now the controversy is focused 

on the algorithms. 

And how will we recreate the algorithms of 

human intelligence?


Ray Kurzweil: To understand the principles 

of human intelligence, we need to 

reverse-engineer the human brain. Here, 

progress is far greater than most people 

realize. The spatial and temporal (time) 

resolution of brain scanning is also progressing 

at an exponential rate, roughly 

doubling each year, like most everything 

else having to do with information. Just recently, 

scanning tools can see individual 

interneuronal connections, and watch 

them fire in real time. Already, we have 

mathematical models and simulations of a 

couple dozen regions of the brain, including 

the cerebellum, which comprises 

more than half the neurons in the brain. 

IBM is now creating a simulation of about 

10,000 cortical neurons, including tens of 

millions of connections. The first version 

will simulate the electrical activity, and a 

Ray Kurzweil has been described as “the restless 

genius” by the “Wall Street Journal.” A leading inventor, 

he has been awarded the MIT-Lemelson 

Prize, one of the world’s biggest prizes for innovation. 

In 1999, he received the National Medal of 

Technology, the USA’s highest honor in technology 

and, in 2002, he was inducted into the National Inventor’s 

Hall of Fame, established by the US Patent 

Office. He has written five books, four of which 

have been national best sellers in the USA. 

2099 

No longer any clear 

distinc tion between 

human s and computers. 

Most conscious entities 

do not have a permanent 

physical presence. 

The number of software-based 

humans 

vastly exceeds those 

still using native neuroncell-based 

computation. 

Even among those 

huma n intelligences still 

using carbon-based 

neurons (brains), there 

is ubiquitous neuralimplan 

t technology. Life 

expectancy is no longer 

a viable term in relation 

to intelligent beings. 

future version will also simulate the relevant 

chemical activity. By the mid-2020s, 

it’s conservative to conclude that we will 

have effective models for all of the brain. 

So at that point we’ll just copy a human 

brain into a supercomputer? 

Ray Kurzweil: I would rather put it this 

way: At that point, we’ll have a full understanding 

of the methods of the human 

brain. One benefit will be a deep understanding 

of ourselves, but the key implication 

is that it will expand the toolkit of 

techniques we can apply to create artificial 

intelligence. We will then be able to create 

nonbiological systems that match human 

intelligence in the ways that humans are 

now superior; for example, our patternrecognition 

abilities. These superintelligent 

computers will be able to do things we are 

not able to do, such as share knowledge 

and skills at electronic speeds. 

By 2030, a thousand dollars of computation 

will be about a thousand times more 

powerful than a human brain. Keep in 

mind that computers will not be organized 

as discrete objects as they are today. 

There will be a web of computing deeply 

integrated into the environment, our bodies 

and brains. 

Why don’t more people see these 

profound changes ahead? 

Ray Kurzweil: The primary failure is the 

inability of many observers to think in exponential 

terms. Most long-range forecasts 

of what is technically feasible in 

future time periods dramatically underestimate 

the power of future developments 

because they are based on what I call the 

“intuitive linear” view of history rather than 

the “historical exponential” view. My models 

show that we are doubling the paradigmshift 

rate every decade. Electronics is just 

one example of many. As another example, 

it took us 14 years to sequence HIV; we 

sequenced SARS in only 31 days. 

So this acceleration of information technologies 

applies to biology as well? 

Ray Kurzweil: Absolutely. It’s not just 

computer devices like cell phones and digital 

cameras that are accelerating in capability. 

Ultimately, everything of importance 

will be comprised essentially of information 

technology. With the advent of nanotechnology-based 

manufacturing in the 2020s, 

we’ll be able to use inexpensive table-top 

devices to manufacture on-demand just 

about anything from very inexpensive raw 

materials, using information processes that 

will rearrange matter and energy at the 

molecular level. 

How can you be so sure of these developments? 

Isn’t technical progress on specific 

projects essentially unpredictable? 

Ray Kurzweil: Predicting specific projects 

is indeed not feasible. But the result 

of the overall complex, chaotic evolutionary 

process of technological progress is predictable. 

What will the impact of these developments 

be? 

Ray Kurzweil: Radical life extension, for 

one. With nanotechnology, we will be able to 

go beyond the limits of biology. The “killer app” 

of nanotechnology is “nanobots,” which are 

blood-cell sized robots that can travel in the 

bloodstream destroying pathogens, removing 

debris, correcting DNA errors and reversing 

aging processes. History teaches us that 

the more intelligent civilization – the one with 

the most advanced technology – prevails. 

But will we still be human after all these 

changes? 

Ray Kurzweil: That depends on how 

you define “human.” Some observers 

defin e “human” based on our limitations. 

I prefer to define us as the species that 

seeks – and succeeds – in going beyond 

our limitations.


The road to a 

green future 

The need to cut carbon emissions and use our natural resources sustainably requires the introduction 

of a host of new green technologies to power our vehicles, provide electricity and make an 

impac t in many other areas of our lives. That provides major opportunities for companies, in both the 

developed and developing world, to seek a share of a fast-expanding market. But the transition 

from fossil fuels to green technologies will be neither swift nor smooth. 

Rajendra K. Pachauri, Director General, The Energy & Resources Institute (TERI), and Chairman, Intergovernmental Panel on Climate Change (IPCC) 

This carbon-constrained world is entering a new era, in which countries 

and companies will compete to augment or replace their fossil 

fuel-based technologies with green technologies. However, the transition 

to a green future will certainly not be either instantaneous or 

smooth. On the basis of every recent projection, including the scenarios 

used by the Intergovernmental Panel on Climate Change 

(IPCC) in its Fourth Assessment Report (AR4) or developed by the 

International Energy Agency (IEA), fossil fuels will continue to be the 

dominant source of energy up to 2030. In fact, competition for as 

yet undiscovered, as well as known, reserves of hydrocarbons is 

likely to intensify in coming years, with aggressive efforts by China 

and to a lesser extent India, rivalling those of longer-established oil 

companies. However, while this race proceeds, spreading even to 

regions like the Arctic, the development and the marketing of green 

technologies worldwide is likely to continue apace. 

There are several factors likely to contribute to a global market in 

green technologies. Firstly, we are now living in a multipolar world, 

where it is not only developed countries such as the USA, Europe 

and Japan that will be pioneering and exploiting new technologies. 

The emergence of countries like China, India and Brazil as major 

economic entities with substantial scientific capabilities will certainly 

alter global developments in the future. The trend toward 

the use of green technologies is likely to be determined by a set of 

new drivers that will affect initiatives all over the world. The first of 

these is a growing preference for environmentally friendly technologies, 

particularly those producing low carbon emissions. The 

greater awareness of climate change issues seen over the last two 

years, largely inspired by the IPCC’s findings, is unprecedented and 

overwhelming. The result is that, not only are the public and governments 

in several parts of the world deeply conscious of the 

need to develop and use green technologies, but business and industry 

have also realized the importance to their future of doing so. 

Consumer attitudes are therefore going to drive government decision-makers 

and businesses in this direction. 

Copenhagen provides impetus 

Much of the likely change will be the result of government legislation 

and regulation in response to priorities set at the national level, as well 

as those stemming from any global agreement to limit greenhouse gas 

(GHG) emissions produced after the climate change talks being held 

in Copenhagen at the end of 2009. There is considerable concern 

over what can be achieved in Copenhagen, but whatever the outcome, 

there is little doubt that the resulting agreement will provide 

a further impetus toward the adoption of low carbon and other >


1 

Renewable 

power capacity 

China 

Small hydro Wind power Biomass power Geothermal 

power 

China 

USA 

USA 

USA 

Solar PV 

(grid-connected) 

Germany 

Solar hot 

water/heat* 

China 

Source: Renewable Energy Policy Network for the 21st Centruy (REN 21) 

2 

USA 

Japan 

Germany 

Brazil 

Philippines 

Spain 

Turkey 

3 

Germany 

USA 

Spain 

Philippines 

Indonesia 

Japan 

Germany 

4 

5 

Spain 

India 

Italy 

Brazil 

China 

India 

Germany 

Sweden 

Finland 

Mexico 

Italy 

USA 

South Korea 

Japan 

Israel 

* Solar hot water/heating numbers are for 2007 

Top green-energy users as at end-2008 

Countries such as China, Brazil and the Philippines are increasingly turning to renewable energy sources to fuel their rapidly expanding economies and are now 

rivalling their Western counterparts in this respect. This provides a good foundation for companies in these markets to become green-technology pioneers.

green technologies. The re-engagement of the USA in this effort 

is a refreshing change that will undoubtedly strengthen any 

agreement that emerges there. The current global economic 

downturn has also exacerbated the trend toward multipolarity 

in the world economy. While some developed economies have 

been hit hard, the Chinese economy has emerged relatively unscathed 

as, to a lesser extent, has India’s. One facet of the development 

of a multipolar world is the major efforts being made 

in countries like China, India and South Korea to adopt greener 

growth strategies. South Korea’s strategy is particularly noteworthy 

because, despite the current economic downturn, the 

country has stuck to its commitment of moving toward a greener 

economic structure. As part of this plan the Korean Government 

aims to create 1.8 million new jobs in the next five years 

through a substantial transformation of the economy to revamp 

conventional activities and boost new sectors with an emphasis 

on green technologies. For instance, South Korea has said it 

plans to use its ship-making technology in wind power and solar 

energy development. The country also wants to capture a large 

share of the global market in green technologies by 2020. 

China already has a big lead in the establishment of renewable 

energy production capacity, as shown in the table opposite. 

India has also essentially given the go-ahead for its solar energy 

mission – one of the eight missions identified in the National 

Action Plan on Climate Change. As part of the solar mission, 

India plans to establish 20,000 MW of solar capacity by the year 

2020, consisting of both photovoltaic and solar thermal power 

production, to provide a substitute for fossil fuels, which provide 

the bulk of the country’s current power-generating capacity. 

The need for early action 

How rapidly the world moves toward a green future will depend on 

the strength of the agreement that comes out of Copenhagen, but 

judging from the outcome of the G8 Summit held in L’Aquila, Italy, in 

July, the leadership of the world’s most powerful nations are poised 

to speed up the process. For the fi rst time, these leaders have set an 

aspirational goal of limiting the average global temperature rise to 2 °C 

as part of their efforts to combat climate change. If this target is to be 

met, then, based on the assessment of the IPCC AR4, it is essential to 

ensure that global emissions of GHGs peak no later than 2015 and 

decline rapidly thereafter. 

If the G8 leadership stands by its intention to limit the temperature 

increase to 2 °C, then the importance of this early date for peak emissions 

will not be lost on them during their deliberations. Whatever the 

provisions of any agreement at Copenhagen, there will be considerable 

pressure on the G8 to put in place measures to ensure the 2 °C limit is 

not exceeded, and this can only happen if a new era of green technologies 

is ushered in rapidly. 

The world is also likely to see major demographic changes, which 

would clearly have a dramatic impact on future economic growth and 

development. Secondly, while developed countries are generally 

experiencing zero population growth, or even a decline in several 

cases, the greatest growth is taking place in the developing world. 

By the middle of this century, the global population is projected to 

reach close to nine billion, and much of the increase will come from 

the developing world. Moving along the path of development historically 

followed by Western nations would put unsustainable pressure 

on the natural resources of developing countries, as well as 

on global resources such as hydrocarbons, the reserves of > 

Rajendra K. Pachauri is Chief Executive of 

TERI (The Energy and Resources Institute) in 

India, Chairman of the Intergovernmental 

Panel on Climate Change (IPCC) and Director 

of the Yale Climate and Energy Institute. He is 

active in several international forums dealing 

with climate change. In 2007, he accepted the 

Nobel Peace Prize for the IPCC, with corecipient 

Al Gore. He has PhDs in Industrial 

Engineerin g and Economics, and has written 

21 books, as well as numerous papers. 

Photo: Thomas Eugster


Actual CO 2 emissions (2006, in tons)*: 

USA 1.6 bn (5.18 tons per capita) 

China 1.7 bn (1.27 tons per capita) 

India 0.4 bn (0.37 tons per capita) 

World 8.2 bn (1.25 tons per capita) 

If China and India emitted as much CO 2 per capita 

as the USA, their annual emissions would increase 

by the following amounts: 

China +308% (6.8 bn tons) 

India +1300% (and 5.8 bn tons) 

If worldwide CO 2 emissions per capita were as high as they 

are in the USA, global CO 2 emissions would rise as follows: 

World +316% from 8.2 bn to 34.1 bn tons) 

* Total fossil-fuel emissions from fossil-fuel burning, cement manufacture and gas flaring, in metric tons of carbon. 

0.4 bn 

1.6 bn 

1.7 bn 

6.8 bn 

5.8 bn 

USA 

China 

India 

Source: Carbon Dioxide Information Analysis Center CDIAC


which are likely to peak in the next decade or two, if they have not 

already done so. The prices of hydrocarbons and other resources 

from our heavily stressed natural environment are therefore likely to 

rise significantly. 

That means the world’s swelling population will only be able to 

reach some semblance of balance through the development and 

use of green technologies. It must also be borne in mind that, in 

some countries, attitudes will be shaped by the youth of tomorrow 

who are not likely to be bound by rigid attitudes and who may be 

very sensitive to the need for employing resource-efficient and environmentally 

sound technologies. In the case of India, for instance, 

one-quarter of the current population of 1.1 billion people is under 

the age of 15, more than half under the age of 25 and two-thirds 

under the age of 35. 

It is expected that 90 million people will join India’s workforce by 

2013. Green technologies will not only enable this large number of 

young people to live in a manner that gives the natural resources of 

India a slim chance of being protected and conserved, but they 

should also provide them with jobs, as renewable energy technologies 

hold much larger employment potential than conventional 

power generation. It is estimated that a coal-based power plant 

provides employment to seven persons per megawatt of capacity, 

while a solar plant would provide 23 jobs per megawatt of installed 

capacity. Overall, therefore, the demographic pressure that is likely 

to develop worldwide would push governments and businesses 

toward embracing the rapid development of green technologies. 

34.1 bn 

Converting slogans into reality 

Another major trend in evidence today is the greater application of 

the principles of sustainability. In most cases, the expressions “sustainable 

development” and “sustainability” are used rather loosely 

without practical application. It is not unusual for companies to refer 

to the concept and even prepare reports on sustainability in 

their operations. However, it is just a matter of time before the 

slogans will need to be converted into reality. If governments, companies 

and civil society are going to support the application of the 

concept of sustainability, they will necessarily have to move toward 

green technologies, because the efficient use of natural resources 

and their sustainability depends largely on the adoption of those 

technologies. Lifestyle changes will also bring about the development 

of green technology, such as domestic lighting, greener automobiles 

and food production. 

If the world is to move toward a low-carbon future, it is essential 

and inevitable that we move into a new era, in which green technologies 

will provide the new opportunities that drive economic 

growth and define economic success. As a result, we should see 

major efforts and growing competition among countries and companies 

to capture a slice of the expanding market for green technologies. 

Just as the horse-drawn carriage became obsolete with 

the advent of the automobile, so we may also see the extinction of 

the fossil fuel-powered internal combustion engine. A new paradigm 

of development is in the making, at the heart of which are 

green technologies and green energy. 

 

8.2 bn 

World 



GLOBAL INVESTOR 2.09 Research — 36 

Li-ion (phosphate) 

< 1 h 

Li-ion (manganese) 

< 1 h 

Li-ion (cobalt) 

1.5–3 h 

Nickel-metal hydride 

2–4 h 

Nickel-cadmium 

< 1 h 

Lead acid 

8–16 h 

0 100 200 300 400 500 km 

Lower range Higher range Charging time 

01_Battery performance 

Time taken to charge at high voltage [h] and driving range [km] for different battery technologies, considering a battery weight of 300 kg 

and electric vehicle energy consumption of 12 kWh / 100 km. Source: Frost & Sullivan, Credit Suisse



While electric vehicles are drawing 

in creas ing attention from the media, 

a detailed analysis of the governmen - 

tal drivers, the global energy chain and 

technology de velopment is needed to 

assess whether they are a meaningful 

solution once im plemented on a large 

scale. 

Reto Hess, CFA 

Research Analyst 

reto.hess@credit-suisse.com 

+41 44 332 87 20 

Dr. Pierre-Yves Bolinger 


pierre-yves.bolinger@credit-suisse.com 

+41 44 334 00 94 

1 

Today, only a small percentage of cars is powered 

by electricity. However, the electrification of cars is 

rapidly increasing, with a number of launches planned 

in the coming years. The forecasts for the future 

market share of electric vehicles (EVs) vary considerably, 

mainly due to different opinions about the 

improvement in battery technologies. For example, 

Renault, which has a strong focus on EVs and intends 

to make the first mass market zero-emission 

auto, expects the EV market to reach three million 

units by 2016 and 10% of cars sold by 2020, respectively, 

while Bosch, a leading automotive supplier, 

forecasts some 500,000 vehicles sold globally by 

2015. However, the relative share of EVs remains 

low under both forecasts. 

Governments are generous with financial support 

for domestic EV makers. China is aiming to 

become the world’s largest producer of EVs, with 

500,000 units by 2011. To reach this target, China 

is currently promoting the use of energy-efficient 

vehicles in 13 cities by providing a subsidy of CNY 

60,000 (USD 8,800) to various public services and 

taxi companies toward buying EVs. Furthermore, the 

government is providing automotive companies with 

CNY 10 billion (USD 1.5 billion) to develop new en- 

“Governments are 

willing to promote 

EVs, mainly driven 

by the aim of 

diminishing and 

even abolishing 

oil import 

dependency.” 

Pierre-Yves Bolinger 

gines. The US government recently granted USD 2.4 

billion in funding support for next generation EVs and 

a USD 8 billion loan (from a USD 25 billion program 

to support advanced technologies) to various companies, 

as well as providing an incentive to purchase 

energy-efficient cars with a federal tax credit of up 

to USD 7,500. In Europe, the European Investment 

Bank has already granted credits of EUR 6.9 billion 

(USD 9.8 billion) since December 2008, of which 

EUR 3.9 billion (USD 5.6 billion) under the European 

Clean Transportation Facility, which targets emissions 

and energy reduction. Further, the purchase of 

EVs is subsidized in some countries (e.g. the UK government 

announced a GBP 5,000 (USD 8,200) subsidy 

from 2011 onward). 

Countries are also promoting the buildup of the 

EV infrastructure. The first nationwide EV infrastructure 

will most likely be built in Israel by 2011 (a country 

with a stated goal of oil independency by 2020), 

which is supported by the government (tax incentives). 

Other initiatives include the buildup of EV 

rental fleets (e.g. Paris is planning to run a fleet of 

2,000 EVs and additional 2,000 EVs in two dozen 

surrounding cities by 2010 including 1,400 stations) 

and/or public fleets (e.g. London’s EV delivery plan 

aiming to stimulate the market for EVs via incentives, 

infrastructure investments and the delivery of 1,000 

EVs to the public fleet). 

All of these programs highlight the willingness of 

governments to promote the electrification of vehicles. 

These incentives are mainly driven by strategic 

objectives to diminish and even abolish oil import 

dependency. Ultimately, combined with renewable 

energy technologies like hydro, biomass, wind and 

solar, countries may be able to generate power domestically. 

On a geopolitical view, we expect strong 

competition between the different regions to lead 

the key technology subsectors and thus avoid a shift 

from energy to technology dependency. 

Additional motivation for these subsidies comes 

from climate change and pollution issues caused by 

combustion engines. Emissions of nitride and sulfur 

oxides, as well as fine particulate matter directly affect 

human health, particularly in urban areas, with 

cumulated annual health costs estimated at USD 

450 billion for the EU, USA and China. While not 

hazardous, carbon dioxide emitted by the transportation 

sector represents a major source (20%) of the 

greenhouse gases responsible for global warming. 

More primary energy from nonfossil sources 

While oil consumption and gas emissions are 

eradicated when cars are powered without combustion 

engines, the assessment of energy consumption 

and pollution must also include the use of primary 

energy. So-called “well-to-wheel” energy consumption, 

which includes both “well-to-tank” and “tankto-wheel” 

inputs, is a more accurate measure to >


judge efficiency as it includes the whole 

energy chain. According to Optiresource, 

an EV (with Li-ion batteries) using the current 

EU mix for electricity emits 87 grams 

of CO 2 

per kilometer and uses six liters of 

gasoline equivalents for 100 kilometers, but 

if electricity is produced by coal instead, 

CO 2 

emissions would increase to 181 grams 

and gasoline equivalents would decline to 

5.4 liters. To reduce CO 2 

emissions and fuel 

consumption, more primary energy has to 

come from nonfossil sources. 

Despite all these drivers, the expansion 

of EVs faces several limitations nowadays. 

One of the main problems is an absence of 

specific infrastructure. Though it is theoretically 

possible to recharge an EV at home, 

most parking spaces are not equipped with 

plugs and the costs for doing so are high. 

For this reason, a network of service stations 

is necessary. Another advantage of 

service stations, in our view, is that they 

enable interaction with the driver/customer. 

A number of collaborations between leading 

power suppliers and carmakers have 

been announced (e.g. RWE / Daimler, Renault 

/ EDF, Nissan / Mitsubishi / Fuji Heavy 

Industries / Tokyo Electric Power among 

others). Manufacturers of charging infrastructure 

will also benefit as governments 

support the buildup of infrastructure (e.g. 

France, UK). An alternative to recharging 

batteries is where motorists can exchange 

them in a matter of minutes at “battery 

switch stations.” 

In order to be commercially successful, 

EVs need to provide similar standards to 

those of conventional gasoline cars in terms 

Mitsubishi i-MiEV 

Coda Automotive Coda Sedan 

Nissan LEAF 

Daimler Smart 

Tesla Motors Model S 

Pininfarina/Bolloré Bluecar 

Volkswagen Up! 

BYD Co Ltd BYD e6 

Early stages 

Leading power suppliers and carmakers 

have announced collaborations to 

develop electrical vehicles. But to be 

commercially successful, electric cars 

will need to provide similar standards 

to those of conventional gasoline cars 

in terms of price, driving range and 

convenience. The advance in battery 

technologies is therefore a key determinant 

for large-scale electrification 

of cars. Moreover, specific infrastructure 

will need to be built up, such as a 

network of service stations to charge 

and maintain EVs. We think the high 

level of competition and strong political 

support should help reduce the 

cost and performance of the different 

electrification technologies. 

02_Summary of selected electric vehicle launches 

The electrification of cars is rapidly increasing, with a number of launches planned in the coming years. Besides small and luxury cars, 

there is a greater offerin g of midsized vehicles. Source: Credit Suisse, Company data 

Producer Country Model Launch Price* Maximal range Planned volumes 

Mitsubishi Japan i-MiEV 2009/2010 JPY 4,599,000 (USD 50,000) 100 miles / 160 km 1,400 in 2009 

Coda Automotive USA Coda Sedan 2009/2010 USD 45,000 120 miles / 195 km n.a. 

Nissan Japan LEAF 2010 n.a. > 100 miles / 160 km 200,000 p.a. by 2012 

Daimler Germany Smart 2010 n.a. 71 miles / 115 km 1,000 in 2010 

BYD Co Ltd China BYD e6 2010/2011 n.a. 249 miles / 400 km n.a. 

Tesla Motors USA Model S 2011 USD 57,400 300 miles / 480 km 15,000–20,000 p.a.** 

Pininfarina/Bolloré Italy/France Bluecar 2011 n.a. 155 miles / 250 km 60,000 p.a. by 2015 

Volkswagen Germany Up! 2011 n.a. n.a. n.a. 

* Including taxes, excluding tax credits for energy efficient-vehicles ** Estimates n.a. = not available


of price, driving range and convenience. 

Currently this is not the case, essentially 

due to insufficient battery performance. The 

advance in battery technologies is therefore 

a key determinant for the progress of EVs. 

A careful analysis of existing technologies 

is important to evaluate which of them has 

the best potential to fulfill the requirements 

for EVs. The oldest and cheapest (80 USD / 

kWh) system to store electrical energy is 

based on lead-acid chemistry, but its energy 

density is insufficient to provide a 

reasonable EV driving range. 

New battery technologies 

The invention of nickel-based (Ni) batteries 

provides improvements in terms of 

energy density amount. As shown in Figure 1, 

NiCd technology enables a driving range of 

between 115 and 200 kilometers, with a 

reference battery weight of 300 kilograms 

and an average EV energy consumption of 

12 kWh / 100 km. While NiCd batteries can 

be fully charged in one hour with fast-charging 

installations, they are prone to problematic 

memory effects that dramatically 

reduce performance over time, as well as 

potential pollution due to the use of cadmium 

(Cd). The introduction of nickel-metal 

hydride (NiMH) technologies provides even 

better performance, with driving ranges 

between 150 and 300 kilometers using our 

reference parameters, without significant 

memory effect or pollution issues. The drawback 

of this process is a long charging time 

up to four hours and a high cost of 300 to 

400 USD / kWh. 

A big step forward has been made by 

the use of lithium (Li), which is the lightest 

of all metals with the greatest electrochemical 

potential. However, the metallic form of 

lithium is chemically unstable and needs to 

be used under its ionic (electrically charged, 

Li+) form. Several chemical formulations 

have been recently developed using cobalt 

(Co), manganese (Mn) or phosphate (PO 4 

). 

While Li-ion Co formulations provide the 

highest energy density, Li-ion PO 4 

and Liion 

Mn formulations are safer and enable 

large driving ranges between 225 and 340 

kilometers and low charging times under 

one hour with our reference parameters. 

Lower battery costs 

As these different Li-ion technologies 

are relatively new and need cooling systems 

for safety reasons, their costs are still 

very high (600–750 USD / kWh) and limit 

their applications to niche markets such as 

exclusive high-performance cars. In a small 

city car like the i-MiEV from Mitsubishi, the 

battery package cost represents a very 

high fraction of approximately 50% of the 

total car price. The expected progress in 

chemical formulations, especially with nanotechnology-enabled 

innovations, as well as 

manufacturing improvements should drive 

battery costs significantly lower. 

High battery costs are obviously a limiting 

factor for the purchase cost of EVs. 

However, it is also important to consider the 

operating costs, which favor EVs versus conventional 

gasoline cars due to lower energy 

costs and higher efficiency. At current oil 

and electricity prices in the USA, an EV can 

drive 69 km / USD, while a gasoline car drives 

29 km / USD. In addition, the entire electrical 

power train contains fewer moving parts, 

thus decreasing the cost of maintenance. 

In our view, electric vehicles will have a 

very attractive and sustainable future once 

the infrastructure has been set up and batteries 

enable good performance at a rea - 

sonable price, which should be achievable 

with Li-ion chemistries. Owing to the high 

level of competition and strong political support, 

we expect a fast improvement in cost 

reduction and performance of the different 

electrification technologies, leading to an 

acceleration in the implementation of EVs. 

With regard to individual companies, we 

expect companies involved in building EVs 

in the early stages to benefit from earlymover 

advantages and generous government 

subsidies. – 

At current oil and electricity prices in the USA, electric cars can drive 69 km / USD, while 

gasolin e cars can drive 29 km / USD. They also have fewer moving parts, which will ultimately 

lower maintenance and operating costs, and enhance efficiency. 

Photos: Mathias Hofstetter / courtesy of: Mitsubishi, Coda Automotive, Nissan, Daimler, Tesla Motors, Pininfarina/Bolloré, Volkswagen, BYD Co. Ltd.


New asset class linked to 

natural disaster risks 

Providing insurance coverage for largescale 

natural disasters requires well-capitalized 

insurance companies. Some of 

these natural disaster risks are transferred 

to financial investors who, in past years, 

have earned attractive returns. 

Cédric Spahr, CFA, CAIA 

Head of Alternative Investment Research 

cedric.spahr@credit-suisse.com 

+41 44 333 96 48 

Reto Meneghetti, CAIA 


reto.meneghetti@credit-suisse.com 

+41 44 334 12 93 

2 

In the 1990s, insured catastrophe losses rose sharply, 

mainly driven by higher population densities in exposed 

areas (e.g. Florida), rising wealth levels and a higher 

demand for insurance coverage. Reinsurance companies 

felt the need to transfer some of these risks to 

the capital markets in order to reduce balance sheet 

risks and capital requirements. Two markets for socalled 

insurance-linked strategies (ILS) emerged as 

a result. Professional investors could invest in the 

insurance-linked strategy market either through ILS 

securities, more commonly called catastrophe bonds 

(hence the nickname cat bonds), or over-the-counter 

(OTC) derivative transactions. Both kinds of instruments 

cover so-called tail event risks, i.e. risks of extreme 

losses resulting from large disasters. In 1997, 

insurance-linked securities were launched for the 

first time. In 2008, the total amount of outstanding 

catastrophe bonds amounted to approximately USD 

13 billion. With USD 350 billion, the total market 

volume of non-securitized swap transactions was 

about 25 times larger than the market for listed cat 

bonds. 

Understanding how cat bonds work 

A catastrophe bond has many similarities with an 

insurance contract. The buyer earns a yearly coupon 

payment in the absence of the insured catastrophic 

event. If the insured natural disaster takes place and 

“Historically, capital 

scarcity and high 

insu rance premiums 

have offered attractive 

entry points 

for investors in 

insuranc e-linked 

strategies.” 

Cédric Spahr 

its intensity exceeds a given threshold, the loss is deducted 

from a trust account including both principal 

and accrued interest. This is similar to an insurance 

company paying a damage claim. A well-diversified 

basket of catastrophe risks like Japanese and Californian 

earthquakes, US hurricanes and European 

winter storms is unlikely to suffer all these insured 

damages at the same time. It is also noteworthy, in the 

aftermath of the subprime credit crisis, to bear in mind 

that ILS fund managers run their own models to estimate 

potential losses from extreme events. This reduces 

the risk of a gross mispricing of risk. That said, 

insurers, reinsurers and ILS investors each compete 

for the largest possible slice of the total premium paid 

to cover a given risk, while minimizing the risk they 

assume. This can cause an asymmetric distribution of 

risk and premiums at times. 

Risk and return characteristics of cat bonds 

Over the past seven years, catastrophe bonds revealed 

attractive risk and return characteristics. In this 

partly illiquid niche market, buyers were few and generally 

able to set prices. Cat bonds clearly outperformed 

the S&P 500 Total Return Index from January 2002 to 

June 2009, with an average annualized return of 7.4% 

compared to –1% for US equities. Volatility was low at 

2.4%, compared to 19.5% for equities. 

Beyond volatility, cat bonds and ILS investments 

exhibit a number of specific risks: 

Liquidity risk: end-investors in ILS products should 

expect liquidity conditions comparable to those of 

hedge funds. 

Counterparty risks: ILS managers use cat bonds and 

total return swaps. Cat bonds are more liquid, but are 

subject to counterparty risk. ILS swap transactions are 

structured with minimal counterparty credit risk and 

have short-term maturities (3–12 months). Maturing 

swap contracts can be rolled over or terminated and 

used for liquidity management. 

Extreme loss risk: if several extreme events occur 

in the same year, investors would probably face double-digit 

losses. Since insurance premiums tend to 

rise after major disasters, the time needed to recoup 

losses need not be very long (see Figure 1). OTC swaps 

have short maturities (3–12 months) and benefit from 

this effect, which is relevant only for newly issued cat 

bonds. This stresses the need of regional and maturity 

diversification in a cat bond portfolio. A stress scenario 

assuming both a replay of the San Francisco 

earthquake of 1906 and of Hurricane Katrina in 2005 

would, for instance, erase the coupon payment and 

10% of the principal value. Assuming low double-digit 

coupon rates, recovering these losses would take 

about 12–24 months. 

Historically, cat bonds exhibited a low correlation 

with equities and bonds (0.1 for government bonds, 

0.36 for equities from 2002 to 2009). Hence, insurance-linked 

strategies would have proved a useful


portfolio diversifier. While it is true that a 

natural disaster can create an adverse shock 

wave in the economy, GDP and consumption 

usually recover rapidly as reconstruction 

activity tends to boost the economy. This is 

what we observed with Hurricane Katrina 

in 2005. 

In contrast to most asset classes, cat 

bonds delivered positive returns in 2008, with 

a gain of 2.1% (see Figure 2). However, the 

financial crisis affected the performance of 

cat bonds. First, in the wake of the Lehman 

Brothers bankruptcy, some cat bonds came 

under pressure, as Lehman Brothers was 

the total return swap counterparty for some 

of them. Second, hedge funds facing margin 

calls were also forced sellers of cat bonds 

in the fourth quarter 2008, creating some 

downward pressure on market prices. 

The insurance industry has experienced 

substantial capital destruction during the 

credit crisis of 2008. Underwriting capacity 

has shrunk. Historically, capital scarcity and 

high insurance premiums have offered attractive 

entry points for investors in insurance-linked 

strategies. Given the inevitability 

of natural disasters and therefore years with 

low or possibly negative returns, cat bonds 

and ILS investments are by definition a longterm 

investment. The asset class might offer 

attractive returns and diversification potential 

in the future, as the insurance industry 

expands its use of this market to manage 

risk exposure and reduce capital requirements. 

At the same time, ILS and cat bonds 

are new financial instruments in an evolving 

niche market and we cannot rule out the 

possibility of this market undergoing periods 

of shake-ups at times due to unexpected 

legal or operational risks. – 

01_Insurance premiums and cat bond returns 

Historically, average insurance premiums for natural risks increased sharply after large natural disasters 

as insurance capital shrank (cat bond returns not available before 2002). Source: Credit Suisse, Aon Benfield 

Index 

200 

180 

160 

140 

120 

100 

80 

60 

40 

20 

0 

Hurricane Andrew 

(USD 50 bn in 

2008 values) 

1991 1993 1995 1997 1999 2001 2003 2005 2007 

Annual cat bond returns 

Stock market 

downturn 

Hurricane Katrina 

(USD 41 bn in 

2008 values) 

Reinsurance premium indicator (r.h.s.) 

Annualized, in % 

Financial 20 

crisis 

18 

16 

14 

12 

10 

8 

6 

4 

2 

0 

02_Performance of cat bonds since 2002 

Catastrophe bonds, proxied by the Swiss Re Cat Bond Index, have weathered financial storms well over 

the past seven years, while generating attractive, lowly correlated returns. Source: Bloomberg, Credit Suisse 

Index 

180 

160 

Collapse of Lehman Brothers 

140 

120 

Hurricane Katrina 

100 

80 

60 

Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 

Swiss Re Cat Bond Total Return Index 

S&P 500 Total Return Index


Existing power grid 

Projected expansion of power grid 

Biomass 

Geothermal 

Concentrating 

solar power 

Photovoltaics 

Wind energy 

Hydropower 

Illustrations: DLR 

Biomass is organic material 

made from plants and animals 

and contains stored energy 

from the sun. (0–1)* 

Geothermal power is extracted 

from heat stored in the earth – 

from shallow ground to hot 

water and hot rock. (0–1)* 

Solar power enables generation of 

electricity by means of heat engines 

or photovoltaics. (10 –250)* 

Wind energy turns moving air 

into energy using wind turbines. 

Groups of turbines are 

called wind farms. (5–50)* 

Hydropower or waterpower 

is power that is derived 

from the force or energy of 

moving water. (0–50)* 

* Minimum and maximum annual electricity yield per 1 km of land area 

01_Energy sources where they are most effective 

Tapping alternative energy sources where they are most effective could mean geothermal energy in volcanic areas, wind along the shores, hydroelectricity in 

mountains and along large rivers, and – most importantly – solar power in the desert. Source: FAOSTAT land use, FAO/TerraStat, World Soil Resources Report 90 (2000), Credit Suisse


Desert power and the 

global energy equation 

In summer 2009, 14 companies decided 

to join forces in a project aimed at meeting 

up to 15% of Europe’s electricity demand. 

The Desertec Industrial Initiative could 

radically change the global energy equation 

by tapping solar energy resources from 

Northern Africa. 

Lars Kalbreier, CFA 

Head of Global Equity and Alternatives Research 

lars.kalbreier@credit-suisse.com 

+41 44 333 23 94 

Roger Signer, CFA 


roger.signer@credit-suisse.com 

+41 44 335 72 98 

3 

The natural characteristics of a region – such as its 

climate or geology – have always been the dominant 

factor behind agricultural goods produced in a region. 

For instance, wine is grown in the mild climate of 

France, Italy or Spain, while northern areas were more 

focused on less demanding crops like hops for beer. 

With the advent of trade, this specialization became 

even more decisive as local advantages were exploited 

through exports and imports. For instance, while 

France was still producing rice in the 1970s and Thailand 

was producing wine, both countries largely 

stopped producing those goods in the 1990s when 

trade barriers decreased and transportation costs became 

lower. 

This economic relationship was described by the 

19 th -century economist David Ricardo, who stated that 

overall utility can be increased if each country focuses 

on the industries where it has a comparative advantage. 

Economic theory suggests that a country has a 

comparative advantage in the production of a good if 

the country is relatively well-endowed with input factors 

that are used intensively in producing the good. 

Today, regional specialization can be widely observed 

in most economic sectors ranging from agricultural to 

high-tech products. With global trade, the idea of autarky 

in a region that only consumes what it produces 

seems to be unrealistic and would imply a material 

“Within six hours, 

deserts receive 

more energy from 

the sun than is 

globally consumed 

in one year.” 

Lars Kalbreier 

setback in wealth of the affected regions. Surprisingly, 

however, there is one sector where Ricardo’s theory 

does not seem to have been adopted – alternative energy. 

Indeed, large solar projects are being implemented 

in Germany, a country which is undoubtedly less 

sunny than its southern neighbors, and thus has less of 

a comparative advantage according to Ricardo. 

It could be argued that the Desertec project addresses 

this paradox and Ricardo’s principles of comparative 

advantage are finally implemented in the alternative 

energy sector as well. Indeed, North African 

countries have a strong comparative advantage relative 

to their European peers: the main input factors for 

solar energy generation are availability/price of land 

and amount /intensity of sunshine. These two factors 

clearly favor North African deserts, as the cost of land 

is almost nil and solar radiation, for example, is twice 

as strong as in Southern Europe. 

“Low-hanging fruit” for Europe 

The Desertec Initiative plans to satisfy a large 

share of Europe’s electricity demand with several solar 

thermal power plants in the Northern African deserts 

(Morocco, Algeria, Tunisia, Egypt and others). Within 

six hours, deserts receive more energy from the sun 

than is globally consumed in one year. By tapping these 

immense and free resources, Desertec aims to provide 

15% of European demand by 2050 at a cost that is 

below the average cost of electricity produced by fossil 

fuels. To meet this goal, the plants would have to have 

the same overall capacity as 100 nuclear power plants 

(i.e. 100 GW). The German Aerospace Center estimates 

the total cost of the project at close to EUR 400 billion 

until 2050. The credibility of the project is supported by 

the fact that several large corporations (Siemens, ABB, 

Munich Re, RWE, E.ON among others) have committed 

themselves to the project earlier this year. 

The concept and the sheer size of the Desertec 

project look ambitious from a technological, geopoli t- 

ical, regulatory and financial point of view. But putting 

the EUR 400 billion project into perspective with 

the challenges of energy supply security and global 

warming that mankind will be facing in the coming 

decades, the project looks less utopian than other 

large-scale projects that have been successfully implemented 

by human beings: the cost of the Apollo 

program, which brought men to the moon, was an 

estimated USD 135 billion during its 13 years (in 2005 

dollars), with much less certain returns for mankind 

than Desertec would have. 

The project is expected to be a major advance for 

energy supply and CO 2 

reduction. In terms of costs, if 

Desertec succeeds in exploiting the comparative advantages 

of North African solar energy, while Europe 

focuses more on wind (along the shore) and hydroelectric 

(in the mountains), this would mean that energy 

can be produced more efficiently for the whole region. 

Desertec estimates that costs for generating 1 kWh >


with solar thermal plants will be roughly EUR 

0.04–0.05 by 2050, significantly below the 

estimated average cost of electricity gene r- 

ation of EUR 0.06–0.07 if the current mix is 

maintained, thus more than offsetting transportation 

losses of 10%–15% from North 

Africa to Europe. The project also allows the 

reduction of carbon emissions. Fossil fuels 

still account for 43% of Europe’s electricity 

production today. And, specifically with gas, 

Europe is highly dependent on imports (more 

than 50% imported). Desertec could lead to 

a significant change in this equation toward 

more renewables and a more balanced portfolio 

of producer countries. Desertec’s plan 

is to diversify production sites between different 

countries in North Africa. Clearly, 

while dependencies from single countries 

are likely to decrease, new dependencies for 

Europe will arise from this project, bringing 

power and possibly a new policy focus to 

the countries involved. Naturally, the project 

does not merely aim to outsource electricity 

generation, but also to foster development 

in the producing countries by creating highlevel 

jobs and spillover effects to other industries. 

Social and geopolitical implications 

Besides the impact on Europe’s energy 

equation, the Desertec Initiative also has the 

potential to alter the geopolitical balance in 

two distinct ways. First, ties between North 

Africa and Europe could become closer from 

more economic interaction and security collaboration. 

And there could also be a rebalancing 

from the Middle East to North Africa. 

Regarding the first point, the Union for the 

Mediterranean (BP: UfM), which was initiated 

in 2008 by Nicolas Sarkozy, might gain in importance 

if the Desertec project is realized, in 

order to handle the development and securing 

of the energy plants in Northern Africa. 

At some point, this increased collaboration 

could also lead to a more integrated approach 

to the Mediterranean economic area – possibly 

with free-trade agreements similar to the 

NAFTA or DR-CAFTA in the case of the USA 

and other Northern and Central American 

countries. Using the USA-Latin America example, 

some Northern African countries could 

use the new export benefits to speed up their 

industrialization and development, such as 

Mexico did in the 1990s. 

Besides improving ties between North 

Africa and Europe, a second shift in the geopolitical 

landscape of power could eventually 

take place from oil-rich countries to sun-rich 

countries, bringing political power and financial 

wealth to North African countries participating 

in the Desertec project. Could the next 

Qatar be on the Mediterranean Sea? Going a 

step further, the current major Middle East 

oil-exporting countries, which also are sunny 

countries, may decide to imitate the Desertec 

Initiative and become green energy exporters. 

If transport efficiency of energy improves 

further, we may witness the emergence of 

major solar initiatives on the African continent 

offering many African nations a new com pe t- 

itive advantage. On the other hand, the losers 

would likely be Russia and the Ukraine, as 

these major oil and natural gas exporters to 

Europe may not be able to compete against 

sun power. 

Foto: Solar Millennium AG/Paul Langrock 

If Desertec succeeds in exploiting the comparative advantages of North 

African solar energy, while Europe focuses more on wind (along the 

shore) and hydroelectric (in the mountains), this would mean that energy 

can be produced more efficiently for the whole region. 

Lower prices and fewer emissions 

The Desertec project, along with other 

energy supply projects such as the “Nabucco” 

gas pipeline, are likely to significantly change 

the global energy equation toward a more 

balanced one. While Desertec is unlikely to 

significantly reduce the overall dependency 

of Europe, it could increase the diversification 

of European energy imports by country. 

Furthermore, Desertec could lead to significantly 

lower energy prices for Europe and 

much fewer CO 2 

emissions. 

Another real opportunity that this largescale 

project opens is the collaboration between 

European and North African countries. 

Increased collaboration might eventually lead 

to increased economic interaction – which 

would entail enormous development potential 

in the North African economies such as 

Morocco, Tunisia or Algeria. As a result, a 

certain rebalancing of power within the Middle 

East North Africa (MENA) region could 

take place, away from the oil-rich gulf countries. 

Desertec could also spur similar projects 

in other regions, providing a new driver 

for alter native energy sources. The project 

itself and its many positive spillover effects 

make Desertec a key milestone likely to significantly 

reshape the economic and geopolitical 

relationships between Europe and 

North Africa. –


Building on 

Africa’s promise 

While the international crisis has pressured 

Africa’s near-term economic growth, 

the continent’s long-term prospects remain 

promising. This economic potential is 

likely to rest on the development of three 

key sectors: commodities, infrastructure 

and mobile telecommunications. 

Eric Güller, CEFA 

Head of Emerging Markets, ex Asia and Thematic Research 

eric.gueller@credit-suisse.com 

+41 44 332 09 69 

Robert Ruttmann 


robert.ruttmann@credit-suisse.com 

+41 44 334 25 38 

4 

Just in terms of the continent’s oil and gas reserves, 

Africa’s 8% of the world’s gas reserves and 9% of oil 

reserves make it the world’s third most-richly endowed 

region for hydrocarbons, trailing only the Middle East 

and Russia /CIS countries. And since exploration in 

Africa in recent history has been so limited, industry 

experts posit that there may still be a lot more oil to be 

found on the continent. Recent discoveries in Uganda 

and Ghana seem to support this view, in addition to 

the fact that proven oil and gas reserves for Africa 

have risen by 15% in the last ten years, compared to 

only 8% for the rest of the world. 

The key African hydrocarbon holders are Nigeria, 

Libya, Algeria, Egypt and Angola, which combined 

account for 92% of total proven African reserves (see 

Figure 2). Nigeria now ranks as the ninth-largest holder 

of proven oil and gas reserves in the world, equivalent 

to 22% of Saudi Arabia’s reserves. Libya is the second-biggest 

holder of hydrocarbon reserves in Africa, 

with the 11 th -largest oil reserves in the world. And 

since sanctions were fully lifted in May 2006, the 

country has been one of the fastest-growing oil producers. 

Africa’s third-largest player is Angola. Angolan 

oil production has also increased by 91% since the 

end of the civil war in 2002. On 1 January 2007, Angola 

became a member of OPEC and, according to the 

State oil company Sonangol, oil production is forecast 

“Aside from 

the continent’s 

hydrocarbons and 

metals, Africa’s 

natural resources 

also extend to its 

tremendous agricultural 

potential.” 

Eric Güller 

to be double the 2006 output by 2010. And despite 

these promising prospects for the African oil and gas 

sector, investors should note that the sector also holds 

a number of risks – mostly political in nature. In Nigeria, 

for instance, political violence in the Niger Delta 

has systematically disrupted production efforts. 

Africa’s commodity wealth also extends to industrial 

and precious metals. The continent ranks in the top 

two positions for its share of global reserves of bauxite, 

cobalt, gold, diamonds, platinum group metals, 

vermiculite and zirconium. The most popular regions to 

invest in metals include the Democratic Republic of 

the Congo, Zambia, Mozambique, Botswana, Namibia, 

Angola, Mali, Guinea and Sudan. For example, the 

Democratic Republic of the Congo is home to some of 

the world’s richest known copper and cobalt ore-bodies 

that are – according to Credit Suisse estimates – 

currently producing at only 5%–10% of their potential. 

Such examples of African metal reserves 

offer much potential to increase production as global 

metal prices recover. Aside from the continent’s 

hydrocarbons and metals, Africa’s natural resources 

also extend to its tremendous agricultural potential. 

For instance, according to the United Nations Food 

and Agriculture Organization, Africa accounts for 

nearly 15% of total global arable land (see Figure 1). 

But for all this potential, Africa uses only 13% of the 

amount of average fertilizer used per hectare on a 

global level, and has just one tractor for every 868 

hectares compared with the global average of one 

tractor per 56 hectares. The cumulative effect of this 

underutilization of Africa’s large arable land resources 

is that African agricultural yields are a staggering 

66% below the global average. It is also in this context 

that the im plementation of improved farming strategies 

could increase agriculture yields and reap rich 

dividends for the continent going forward. Achieving 

this would also have a big impact on the people of 

Africa, since nearly 65% of Africans continue to work 

in the agriculture sector. 

Infrastructure as the foundation 

The second key to unlocking Africa’s economic 

growth potential will be building the infrastructure that 

the continent needs. It is a sad reality that Africa’s 

productivity continues to be limited by insufficient infrastructure, 

resulting in transport bottlenecks and 

electricity supply outages. 

In terms of transportation, it continues to be difficult 

and costly to move goods in and out of Africa. The 

continent has just a few broken-down railways and 

nothing resembling a transcontinental motorway. For 

example, although road transport makes up 90% of 

intra-urban transport in Africa, only 19% of Africa’s 

roads are paved. The continent’s road density is also 

the lowest in the world at merely 7 km per 100 square 

km (only a third of Asia’s), and a contributing reason 

for Africa having the lowest infrastructure density in >


Current area of arable land (2003, in million hectare) 

Estimated potential of equivalent rain-fed arable land area (in million hectare) 

166 


119 

80 

71 

39 

39 

Western Africa 

Northern Africa 

Southern Africa 

48 

61 

24 

19 

4 

22 

Eastern Africa 

Central Africa 

Western Indian Ocean Islands 

01_Africa has 14.6% of the world’s arable land 

According to the United Nations Food and Agriculture Organization, Africa accounts for nearly 15% of total global arable land. But for all this potential, 

Africa uses only 13% of the amount of average fertilizer used per hectare on a global level, and has just one tractor for every 868 hectares compared with 

the global average of one tractor per 56 hectares. Source: FAOSTAT land use, FAO/TerraStat, World Soil Resources Report 90 (2000), Credit Suisse


the world (see Figure 3). The deficiency of 

reliable infrastructure also makes transportation 

of trade expensive, the high costs of 

which represent a de facto barrier to trade 

and economic activity. In fact, a study by 

America’s trade department found that it 

cost more to ship a ton of wheat from 

Mombasa in Kenya to Kampala in neighboring 

Uganda than it did to ship it from 

Mombasa to Chicago. 

Many countries have recognized the value 

of building reliable transportation infrastructure 

to support economic activity. For 

instance, Libya announced just last year 

that it would spend USD 123 billion (about 

186% of GDP) over five years on building 

roads, ports, schools and housing by using 

its oil windfalls. But it is not just transportation 

infrastructure that needs to be developed 

in Africa. Africa also needs the infrastructure 

necessary to secure a supply 

of electricity to its people and small businesses. 

The continent still generates just 

3% of the world’s total electricity. And paradoxically, 

Africa has vast reserves of the 

world’s main energy sources, with one third 

of the world’s hydro sources, the third-largest 

coal reserves, and plenty of wind and 

sunshine for wind and solar power. For example, 

the World Bank estimates that the 

expansion of the Inga hydro project on the 

Congo River could provide enough electricity 

to power the whole continent. In this 

context, it seems clear to us that getting 

electricity to African people will be of pivotal 

importance for Africa’s medium-term 

development prospects. 

Connecting the unconnected 

The third sector that is likely to play a 

central role in the continent’s development 

is Africa’s telecommunications sector. 

While today still only 40 of every 100 

Africans have access to a mobile phone, 

this ratio has started to increase fast in recent 

years. In 2008, Africa had the fastestgrowing 

telecom market in the world, with 

mobile companies signing up nearly 90 

million new subscribers across the continent 

in just one year. This amount is larger 

than the population of Germany, and represents 

a yearly subscriber growth rate of 

33%. Looking ahead, we expect mobile 

subscriber growth rates in Africa to average 

19% per year through 2012, which would 

be the highest growth rate in the world 

(see Figure 4). These rapid growth prospects 

are due to the uniquely important role the 

mobile phone has taken on in the African 

context. For instance, phones substitute 

for travel, making up for poor infrastructure; 

they also allow for a more efficient distribution 

of market information, allowing traders 

to engage in wider markets and many Africans 

use phones to transfer money and pay 

bills, making up for limited banking facilities. 

In such instances, phone usage is not merely 

a luxury or convenient alternative to fixedline 

services, but a veritable necessity. 

Furthermore, several studies have confirmed 

that people’s incomes typically rise 

when they gain access to a mobile phone. 

For example, a well-known 2007 study 

from Harvard University tracked fishermen 

off the coast of southern India, finding that 

when they started using cell phones to call 

around to prospective buyers before they’d 

even got their catch to shore, their profits 

went up by an average of 8%, while consumer 

prices in the local marketplace went down 

by 4%. Building on this theme, a 2005 

London Business School study concluded 

that for every additional ten mobile phones 

per 100 people, a country’s GDP rises 0.5%. 

It is also in this context of cell phones improving 

market efficiency that the mobile 

telephone boom is likely to be the third vital 

sector in the African development process. 

Focused investment in the future 

In the final analysis, African long-term 

prospects are likely to be intricately linked 

to the extent to which African and foreign 

entrepreneurs can capitalize on the potential 

in its commodity, infrastructure and 

mobile telecommunications sectors. And 

although the global crisis will certainly dent 

Africa’s short-term growth prospects, these 

three secular industry trends are likely to 

form the foundation for Africa’s sustainable 

long-term growth. – 

02_Key African hydrocarbon 

holders 

The key African hydrocarbon holders are Nigeria, 

Libya, Algeria, Egypt and Angola, which combined 

account for 92% of total proven African reserves. 

Source: BP, Credit Suisse 

8 

6 

4 

2 

0 

2 

1 

0 

Total 

Africa 

Libya 

Nigeria 

Algeria 

Angola 

Sudan 

Egypt 

Dem. Rep. 

of the Congo 

Gabon 

Chad 

Oil reserves as % of world 

Natural gas reserves as % of world 

03_The world’s lowest 

infrastructure density 

Infrastructure density index (of paved roads, rail 

networks, airports and telephone line density) 

Source: UN Economic Commission for Africa, Credit Suisse 

140% 

120% 

100% 

Advanced 

economies 

80% 

60% 

40% 

20% 

0% 

Africa 

Emerging 

markets 

Asia 

Pacific 

Middle 

East 

Guinea 

Tunisia 

Asia Latam Africa 

04_The world’s fastest-growing 

telecom market 

Africa has the world’s lowest penetration rate 

and the highest subscriber growth rate of mobile 

phones. Source: Cowan Group, Credit Suisse 

Latin 

America 

North 

America 

Eastern 

Europe 

Mobiles/100 people 2008 (l.h.s.) 

Projected annual compound growth rate 

2007–2012E (r.h.s.) 

Other 

Western 

Europe 

20% 

16% 

12% 

8% 

4% 

0%


Renaissance of 

Swiss franc bonds 

The last 30 years have been marked by 

a general decline of the Swiss franc 

as an international reserve and safe-haven 

currency. However, Swiss franc bonds 

may see a revival as a value-preservation 

vehicle amid rising uncertainty 

about inflation, currency prospects 

and credit quality. 

Dr. Nannette Hechler-Fayd’herbe 

Head of Global Fixed Income and Credit Research 

nannette.hechler-fayd’herbe@credit-suisse.com 

+41 44 333 17 06 

5 

In the inflationary era of the 1960s and 1970s, Switzerland 

was seen as a haven of price stability and currency 

strength. The Swiss franc was thus popular 

among investors, despite low interest rates, and it 

represented some 10% of global bond issuance in the 

1970s and more than 3% of global currency reserves. 

Things changed in the 1980s and 1990s, as many 

countries around the world pursued disinflationary 

policies. This eroded investor demand for stable Swiss 

assets, and the low interest rates in Switzerland gradually 

became a significant discouragement to international 

investment in Swiss franc fixed income. Swiss 

franc bond issuance declined in relation to total issuance, 

falling to below 2% in recent years. The share of 

Swiss francs in total currency reserves stood at just 

0.1% at the end of 2008. However, the recent financial 

crisis has led to persistent changes in the global 

macroeconomic landscape, strongly increasing public 

debt in many developed countries, as well as raising 

future depreciation risks. Many investors with public 

mandates – central banks and sovereign wealth funds 

(China and Russia in particular) – are thus concerned 

about the long-term safety of their assets and the 

need to diversify more. Here, the Swiss franc fixed income 

market could play a significant role as, after all, 

it is one of the largest and most liquid markets after 

the US dollar and euro giants, offering a wide range of 

tradable fixed income securities in decent amounts 

“In their quest for 

value preservation, 

we expect international 

investors 

to look more to 

CHF-denominated 

bonds again.” 

Nannette Hechler-Fayd’herbe 

that are not offered in other second-tier markets. Coupled 

with supportive structural factors, this may stage 

a long-term turning point in investors’ perceptions of 

Swiss franc bonds. 

A long-standing anti-inflationary culture 

Swiss inflation has generally been significantly lower 

than inflation rates in most other countries since the 

1960s (see Figure 1). The Swiss National Bank (SNB) 

has a longer tradition of institutional independence 

than most other central banks, and price stability preservation 

has long been constitutionally anchored in 

the SNB’s mandate. In the past, the SNB has repeatedly 

shown its readiness and ability to steer monetary 

policy so as to produce a strong inflation track record. 

Price stability is a crucial element of the Swiss economy’s 

competitiveness. Switzerland notoriously operates 

as a high-wage / high-price economy. A Eurostat 

study published in July 2009 finds that the general 

price level in Switzerland is still the second-highest in 

Europe after Denmark and Norway. To compete internationally, 

Switzerland must focus on producing high 

value-added goods and services. Inflation needs to 

be kept low so as to not erode competitiveness. Low 

inflation in turn allows interest rates to be kept low, 

thus encouraging investment. Switzerland has relied 

heavily on monetary policy in the most recent financial 

crisis – much more than on fiscal policy – to support 

the financial system and the economy. Accordingly, 

the SNB’s balance sheet is more than twice its usual 

size and the money base is up +140% versus 2008 as 

of July 2009. Still, the long-term inflationary threat 

of this policy can be regarded as limited. As of July 

2009, among SNB assets, close to CHF 30 billion are 

dated currency swaps covered by a roughly equal increase 

of domestic and foreign bank sight deposits on 

the liability side. This implies that the SNB’s balance 

sheet can be reduced by that amount at short notice 

(most swaps have a one-week maturity), with sight 

deposits and the money base declining similarly. This 

provides the SNB with considerable flexibility to exit 

its quantitative easing policy and is positive for longterm 

inflation perspectives. 

Unaltered conservative fiscal framework 

After a period of rising budget deficits and growing 

debt in the 1990s, the Swiss people voted to implement 

the so-called debt-brake mechanism. Constitutionally 

inscribed and enforced since 2003, this mechanism 

aims at a structurally balanced budget, setting 

annual expenditure ceilings and preventing excessive 

accumulation of debt via future expenditure corrections. 

In the face of the recent financial crisis, Keynesian-style 

public expenses were kept low-key compared 

to other countries (less than 0.5% of GDP). As 

for the government’s CHF 6 billion convertible loan to 

the country’s largest bank, UBS, the temporary nature 

of this help was emphasized at the onset and con-


firmed by the recent profitable exit of the 

Swiss government from UBS’ capital base. It 

can therefore be expected that, while budgets 

will clearly be in deficit in 2009 and 

2010 after a period of surpluses, these are 

unlikely to turn into structural budget deficits, 

and public debt to GDP ratios well below 

60% continue to compare favorably with 

most other developed countries. 

01_Selected inflation rates 

The Swiss National Bank has recorded average yearly price increases over the past hundred years of 

only 2.5% per year. This compares favorably to the USA, the UK and the EU. Source: Dimson & Marsh, Eurostat 

CPI USA UK EU* Switzerland 

1900–1960 2.2 2.6 n.a. 2.0 

1961– to date 4.3 6.3 4.3 3.1 

* CPI calculated before harmonized in 1990. 

Swiss franc secular appreciation trend 

A currency’s purchasing power increases 

with every favorable inflation differential to 

other currencies and constitutes a long-term 

appreciation force. Switzerland’s capitalexporting 

economy additionally generates 

large current account surpluses from capital 

income every year. At the same time, Swiss 

demographics indicate an aging population, 

which will likely result in the gradual repatriation 

of Swiss capital invested abroad at future 

dates. For all these reasons, the Swiss 

franc exhibits a secular real appreciation trend 

against most other currencies (see Figure 2). 

Reemerging differences in countries’ monetary 

and fiscal track records, along with 

higher currency volatility, may well restore 

the status of the Swiss franc as a valuepreservation 

vehicle and potentially reignite 

the long-term structural appreciation trend, 

which slowed in the past decade. Against 

the US dollar, the Swiss franc is expected to 

fall below parity over a 12-month horizon. 

Against the euro, our equilibrium exchange 

rate estimations for EUR/CHF indicate a fair 

value at 1.40, which also indicates the significant 

scope for Swiss franc appreciation 

once more normal economic and financial 

conditions enable the SNB to allow market 

forces to work more freely again. 

02_Real trade-weighted Swiss franc 

In the past decade, Swiss franc appreciation slowed with the successful stabilization of the international 

currency landscape and the introduction of the euro in 1999. Source: Bloomberg, Credit Suisse / IDC 

120 

110 

100 

90 

80 

70 

60 

50 

1970 

1974 

1978 

1982 

CHF JPMorgan real broad effective 

(Base Year 2000 = 100) 

1986 

1990 

1994 

1998 

60-months moving average 

2002 

2006 

Swiss bonds offer diversity and size 

In their quest for value preservation, we 

expect international investors to look more to 

Swiss franc denominated bonds again. Favorable 

inflation and fiscal perspectives compared 

to the rest of the developed countries 

will sustain outperformance of the Swiss 

bond market in an environment of generally 

rising yields, underscored by a positive currency 

outlook. The Swiss bond market offers 

diversity and improving liquidity, with a trend 

toward more and bigger issuers. A major 

benchmark bond index provider, Barclays, 

has already announced the inclusion of Swiss 

franc bonds as of January 2010 in their 

Global Aggregate, Pan European Aggregate 

and Global Treasury indices. – 

A long-standing tradition: built in the 19 th century, the ceiling in the entrance 

hall of the Federal Palace of Switzerland is decorated with emblems 

from the nation’s states or cantons in a circle around the Swiss flag. 

Foto: Edi Engeler / Keystone


Foto: Mathias Hofstetter 

Access to data and applications from anywhere via the Internet 

An increasing number of companies are accessing Web-based applications delivered via the Internet, on demand, from massive data centers. 

The name “cloud computing” comes from the cloud symbol usually used to represent the Internet in flowcharts and network diagrams.


Cloud computing – the 

future of corporate IT? 

While consumers have been familiar 

with “cloud-based” technology for some 

time now, corporates have been lagging 

behind mainly for security reasons. 

This is set to change, in our view, offering 

a USD 150 billion market opportunity. 

Ulrich Kaiser, CEFA 


ulrich.kaiser@credit-suisse.com 

+41 44 334 56 49 

Steffen Sabas 

Research Assistant 

steffen.sabas@credit-suisse.com 

+41 44 334 54 94 

6 

Computing has constantly changed shape and location, 

mainly as a result of new technology, but often 

also because of shifts in demand. The mainframe, the 

original computing platform, was dethroned by minicomputers, 

which in turn gave way to personal computers, 

which are now being pushed aside by handheld 

devices and smartphones. Computing is taking on yet 

another new form. It is becoming more centralized 

again as some of the activity moves into data centers. 

But more importantly, it is turning into what has come 

to be called a “cloud,” or collections of them – so-called 

“cloud computing.” Computing power will become more 

and more disembodied (virtualized over the Internet) 

and will be consumed where and when it is needed 

(scalable over the Internet). Every time you use platforms 

like Facebook, Gmail (Google’s e-mail service) 

or Hotmail, you are using cloud computing. 

Companies like Google and Salesforce.com are 

aligned with cloud computing through their subscription-based 

business models. Realizing the quick shift 

to the “cloud,” Microsoft has made the most strides in 

cloud computing in the past year. The introduction of 

its Azure platform is aimed at shifting the balance of 

power from dominant cloud players like Google, Sales- 

“Cloud providers 

can host software at 

a much lower cost 

than enterprise 

customers are able 

to by themselves.” 

Ulrich Kaiser 

force.com and Amazon. We see further battle lines 

between software incumbents such as Microsoft, Oracle 

and SAP, and the Internet challengers, including 

Google, Salesforce.com, NetSuite and Amazon. Microsoft 

will find itself competing more for developer mindshare 

versus Google, Salesforce.com, Adobe and 

Amazon. These competitors are taking aim at Microsoft’s 

crown jewel, which is the operating system, and 

are trying to make the browser the operating system 

instead. Google’s Gear, an open source project, puts 

the company in a better position to offer Gmail, documents 

and spreadsheets as a packaged off-line product 

like Microsoft Office. With its search appliance, 

Google could be in a position to index corporate files, 

databases and applications like SAP and Oracle, much 

like it indexes the content in the World Wide Web. 

Salesforce.com is taking a different approach by implicitly 

positioning itself as a Web-based portal and 

dashboard for corporate information sitting inside SAP 

and Oracle. 

Large Internet companies with scale who have 

already heavily invested in data center infrastructure 

(Amazon, Google, Microsoft, Yahoo, possibly eBay) 

should be able to leverage their assets to develop additional 

revenue streams, helping offset capital investment. 

New product offerings will range from computing 

and storage infrastructure services to Web-based 

applications. The near-term beneficiaries are Amazon 

and Google, who have already launched commercial 

cloud applications and platforms. As cloud computing 

becomes more mainstream, users will spend more 

time online, likely integrating more Internet-related 

tasks such as search, e-commerce or media consumption 

as they access their cloud-based applications. We 

believe this is Google’s principle strategy for its consumer-focused 

cloud applications, hoping to envelop 

the user in Google products, which will lead to more 

usage of Google’s search engine. 

Shared data centers 

The emergence of broadband capacity and the use 

of low-cost commodity hardware and virtualization (all 

becoming mature and field-tested) made cloud computing 

possible. This also follows the combination of 

ever cheaper and more powerful processors, naturally 

with ever faster and more ubiquitous networks. As a 

result, data centers are becoming factories for computing 

services on an industrial scale; software is increasingly 

being delivered as an online service; and wireless 

networks connect more and more devices to such 

offerings. The market research company Gartner estimates 

(see Figure 1) that worldwide cloud service revenue 

will not only surpass USD 56 billion this year, but 

will surge to just over USD 150 billion in 2013, up 168% 

in just four years. Already by the year 2012, Gartner 

estimates that 80% of the global Fortune 2000 

companies will have moved parts of their business to 

the cloud. Cloud-based business process service >


make up the largest part of the cloud services 

market, which includes advertising, 

e-commerce, human resources and payments 

processing. Gartner forecasts 19.8% 

year-on-year growth in the segment to 

USD 46.6 billion this year. By 2013, business 

process services are expected to 

grow to USD 119.3 billion (see Figure 1). The 

consumer cloud opportunity will continue 

to be subsidized by the online advertising 

industry, with a portion of the online advertising 

market being incrementally driven by 

cloud application usage, such as that provided 

by Google and emulated by Microsoft, 

Yahoo and others, accounting for 60% of 

overall cloud services and likely to remain 

the largest component through 2013. 

Cloud computing enables further IT 

outsourcing in three distinct ways: “software 

as a service” (SaaS) is a mature and 

well-developed market pushed under the 

cloud computing concept. SaaS is “outsourcing” 

in its original form, where providers 

offer customized, hosted software to 

fill needs previously solved by licensing or 

software developed in-house. Basic applications 

such as CRM (customer relationship 

management), human resources and 

payroll are ideal SaaS candidates. The 

most widely used cloud marketplace is 

server and storage cloud computing, which 

is known as “infrastructure as a service” 

(IaaS). Providers offer services such as 

code management and testing to storage 

and hosting in a Web-based interface. 

Customers will find several providers 

for different services in a number of “public 

clouds.” However, for their own enterprises, 

IT customers will be provided with their 

own “private clouds.” In contrast to public 

clouds, these private clouds are based on 

separate, private networks, in order to 

guarantee the company’s need for increased 

security and better control of the 

system, such as for civil services, banks or 

insurance companies. 

01_Breakdown of worldwide cloud services (in USD bn) 

Most IT subsectors offer cloud services with business process services taking the lead, but system 

infrastructure services showing higher growth from a low level. Source: Gartner Research 

Business process services 

Clients 

Public cloud 

2008 2009 2010 2011 2012 2013 CAGR (%) 

Cloud-based advertising 28.0 33.0 38.9 47.4 59.2 76.9 22.1 

E-commerce 1.3 1.8 2.5 4.0 7.2 12.0 56.0 

Human resources 7.5 8.9 11.3 14.1 16.2 18.0 19.0 

Payment processing 0.3 0.5 0.75 1.0 1.9 2.6 54.0 

Others 1.8 2.4 3.5 4.9 7.0 9.8 40.3 

Business process services total 38.9 46.6 57 71.4 91.5 119.3 25.1 

Applications total 5.04 6.52 9.6 11.4 14.6 20.2 32 

Application infrastructure 

Platform infrastructure 0.05 0.07 0.09 0.13 0.2 0.4 51.6 

Integration services 1.47 1.54 1.62 1.7 1.78 1.86 5.0 

Application infrastructure total 1.52 1.61 1.71 1.83 1.98 2.26 8.3 

System infrastructure 

Computer services 0.66 1.17 2.0 3.4 4.9 6.8 59.5 

Storage services 0.009 0.025 0.084 0.241 0.525 0.75 52.8 

Backup services 0.3 0.37 0.45 0.55 0.67 0.82 22.3 

System infrastructure total 0.96 1.56 2.53 4.19 6.1 8.37 53.8 

Infrastructure total 2.6 3.4 5 6 8.1 10.6 33.5 

Cloud services total 46.4 56.3 70.8 88.8 114.2 150.1 26.5 

Pay as you go 

Cloud providers can host software at a 

much lower cost than enterprise customers 

are able to by themselves. Virtualization 

and provisioning software lets them efficiently 

allocate computing resources, lowering 

their cost of hardware. Moreover, 

cloud computing providers are able to locate 

facilities at low-cost locations, as opposed 

to most enterprises. This benefits 

enterprise customers, since most of them 

find it expensive and complicated to man- 

Private cloud 

Public clouds include numerous providers for different 

services. Private clouds are based on separate, private 

networks to guarantee companies such as banks and 

insurers increased security and control.


age their data centers themselves. There are 

low up-front costs involved and other than 

the costs for a device to access the cloud 

services (e.g. a PC), browser and network 

capacity for each end-user, there are none 

of the usual up-front software or hardware 

costs that customers need to pay. 

Companies only pay for the capacity 

that they are utilizing. Utility providers price 

their services on a pay-as-you-go model, 

similar to the subscription-based pricing of 

on-demand companies. Already, many businesses 

are making use of usage based on 

subscription payments. For business solutions 

such as on-demand CRM, ERP (enterprise 

resource planning), or travel/expense 

administration, customers usually commit to 

two-year contracts, with monthly payments. 

For IT resources such as storage, customers 

pay by consumption. For example, Amazon’s 

services offer users the ability to only pay 

for the capacity they use, based on memory 

and storage. This pay-as-you-go model lets 

them convert otherwise fixed costs into variable 

costs, and often moves them from the 

capital budget to the operating budget, 

which is very lucrative for small and mediumsized 

companies. 

Flexibility and speed of deployment 

Moreover, customers are more flexible 

since it is easy to scale up capacity without 

the need for incremental lump sum capital 

spending. It is also easier to establish IT operations 

and there is less need for IT expertise 

at the company level. Customers also 

find their speed of deployment to be much 

quicker than if they were to build applications, 

or worse, a whole data center from 

scratch. If a cloud vendor’s solution does not 

work or if customers are dissatisfied, it becomes 

easier for the customer to switch to 

another vendor, using a competing solution 

by signing a new contract, transferring data 

and retraining users. 

Corporate computing has been lagging 

behind the cloud computing trend so far. But 

this is set to change, in our view. The ingredients 

such as low-cost commodity hardware, 

speed and virtualization combined with 

security are tested and are becoming mature. 

Most importantly, the corporate need 

to manage costs is driving cloud computing 

usage. We believe we are on the threshold 

of a new USD 150 billion market. Companies 

that have already invested in data centers 

(Amazon, Google, Microsoft, Yahoo and 

possibly eBay) are well positioned to ride the 

pending wave. – 

One giant cloud 

Recently, SuccessFactors, a 

provider of performance and talent 

man agement solutions, announced 

with Siemens that the two companies 

had entered into a “software as a 

service” (SaaS) contract. The new 

Siemens talent-managing environment 

being deployed by SuccessFactors 

will link and unify 420,000 users 

across 80 countries in 20 languages 

in one giant cloud, drawing further 

attention to the maturity of cloud 

computing and showing its complexity 

and scalability. 

420 000 

80 

20 

02_Strong medium-term 

growth 

Spurred by corporate IT spending, worldwide 

cloud services are becoming a driving force for 

global IT demand. Source: Gartner Research, Credit Suisse 

USD bn % 

160 

140 

120 

100 

80 

60 

40 

20 

0 

2008 2009E 2010E 2011E 2012E 2013E 

Cloud services (USD bn) 

Growth (in %, r.h.s.) 

03_Business process services 

set to dominate 

Business process services such as advertising, 

e-commerce, human resources and payments 

processing make up the largest part of the cloud 

market. Source: Gartner Research, Credit Suisse 

USD bn 

120 

100 

80 

60 

40 

20 

0 

Business process 

services Applications Infrastructure 

2008 

2013E 

135 

130 

125 

120 

115 

110 

105 

100

GLOBAL INVESTOR 2.09 Services — 54 

Disclosure appendix 

Analyst certification 

The analysts identified in this report hereby certify that views about the companies and 

their securities discussed in this report accurately reflect their personal views about all of 

the subject companies and securities. The analysts also certify that no part of their compensation 

was, is, or will be directly or indirectly related to the specific recommendation(s) 

or view(s) in this report. 

Important disclosures 

Credit Suisse policy is to publish research reports, as it deems appropriate, based on 

developments with the subject company, the sector or the market that may have a material 

impact on the research views or opinions stated herein. Credit Suisse policy is only to 

publish investment research that is impartial, independent, clear, fair and not misleading. 

The Credit Suisse Code of Conduct to which all employees are obliged to adhere, is 

accessible via the website at: 

https://www.credit-suisse.com/governance/en/code_of_conduct.html 

For more detail, please refer to the information on independence of financial research of 

the Global Research department of the Private Banking division at Credit Suisse, which 

can be found at: 

https://www.credit-suisse.com/legal/pb_research/independence_en.pdf 

The analyst(s) responsible for preparing this research report received compensation that 

is based upon various factors including Credit Suisse’s total revenues, a portion of which 

are generated by Credit Suisse Investment Banking business. 

Additional disclosures for the following jurisdictions 

Hong Kong: Other than any interests held by the analyst and/or associates as disclosed 

in this report, Credit Suisse Hong Kong Branch does not hold any disclosable interests. 

United Kingdom: For fixed income disclosure information for clients of Credit Suisse (UK) 

Limited and Credit Suisse Securities (Europe) Limited, please call +41 44 333 12 11. 

For further information, including disclosures with respect to any other issuers, please refer 

to the Credit Suisse Global Research Disclosure site at: 

https://www.credit-suisse.com/research/disclaimer 

Credit Suisse HOLT 

With respect to the analysis in this report based on the HOLT(tm) methodology, Credit 

Suisse certifies that (1) the views expressed in this report accurately reflect the HOLT 

methodology and (2) no part of the Firm‘s compensation was, is, or will be directly related 

to the specific views disclosed in this report. The Credit Suisse HOLT methodology does 

not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary 

quantitative algorithms and warranted value calculations, collectively called the 

Credit Suisse HOLT valuation model, that are consistently applied to all the companies 

included in its database. Third-party data (including consensus earnings estimates) are 

systematically translated into a number of default variables and incorporated into the 

algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, 

pricing, and earnings data provided by outside data vendors are subject to quality 

control and may also be adjusted to more closely measure the underlying economics of 

firm performance. These adjustments provide consistency when analyzing a single company 

across time, or analyzing multiple companies across industries or national borders. The 

default scenario that is produced by the Credit Suisse HOLT valuation model establishes 

the baseline valuation for a security, and a user then may adjust the default variables to 

produce alternative scenarios, any of which could occur. The Credit Suisse HOLT methodology 

does not assign a price target to a security. The default scenario that is produced by 

the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as 

the third-party data are updated, the warranted price may also change. The default variables 

may also be adjusted to produce alternative warranted prices, any of which could occur. 

Additional information about the Credit Suisse HOLT methodology is available on request. 

CFROI(r), CFROE, HOLT, HOLTfolio, HOLTSelect, HS60, HS40, ValueSearch, AggreGator, 

Signal Flag and “Powered by HOLT” are trademarks or registered trademarks of Credit Suisse 

or its affiliates in the United States and other countries. HOLT is a corporate performance 

and valuation advisory service of Credit Suisse. 

For technical research 

Where recommendation tables are mentioned in the report, “Close” is the latest closing 

price quoted on the exchange. “MT” denotes the rating for the medium-term trend (3 – 6 

months outlook). “ST” denotes the short-term trend (3 – 6 weeks outlook). The ratings are 

“+” for a positive outlook (price likely to rise), “0” for neutral (no big price changes expected) 

and “-“ for a negative outlook (price likely to fall). Outperform in the column “Rel perf” 

denotes the expected performance of the stocks relative to the benchmark. The “Comment” 

column includes the latest advice from the analyst. In the column “Recom” the date is 

listed when the stock was recommended for purchase (opening purchase). “P&L” gives the 

profit or loss that has accrued since the purchase recommendation was given. 

For a short introduction to technical analysis, please refer to Technical Analysis Explained at: 

https://www.credit-suisse.com/legal/pb_research/technical_tutorial_en.pdf 

Guide to analysis 

Relative stock performance 

At the stock level, the selection takes into account the relative attractiveness of individual 

shares versus the sector, market position, growth prospects, balance-sheet structure and 

valuation. The sector and country recommendations are “overweight,” “neutral”, and 

“underweight” and are assigned according to relative performance against the respective 

regional and global benchmark indices. 

Absolute stock performance 

The stock recommendations are BUY, HOLD and SELL and are dependent on the expected 

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

based on the following criteria on the following criteria: 

BUY 

HOLD 

SELL 

RESTRICTED 

TERMINATED 

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 types of 

communications, including e.g. an investment recommendation during the course of 

Credit Suisse engagement in an investment banking transaction. 

Research coverage has been concluded. 

Absolute bond performance 

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: 

BUY 

HOLD 

SELL 

RESTRICTED 

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 types of 

communications, including e.g. an investment recommendation during the course of 

Credit Suisse engagement in an investment banking transaction.

GLOBAL INVESTOR 2.09 Services — 55 

Global disclaimer/important information 

References in this report to Credit Suisse include subsidiaries and affiliates. For more 

information on our structure, please use the following link: 

http://www.credit-suisse.com/who_we_are/en/structure.html 

The information and opinions expressed in this report were produced by the Global 

Research department of the Private Banking division at Credit Suisse as of the date of 

writing and are subject to change without notice. Views expressed in respect of a particular 

stock in this report may be different from, or inconsistent with, the observations and 

views of the Credit Suisse Research department of Investment Banking division due to the 

differences in evaluation criteria. The report is published solely for information purposes 

and does not constitute an offer or an invitation by, or on behalf of, Credit Suisse to buy 

or sell any securities or related financial instruments or to participate in any particular 

trading strategy in any jurisdiction. It has been prepared without taking account of the 

objectives, financial situation or needs of any particular investor. Although the information 

has been obtained from and is based upon sources that Credit Suisse believes to be reliable, 

no representation is made that the information is accurate or complete. Credit Suisse 

does not accept liability for any loss arising from the use of this report. The price and 

value of investments mentioned and any income that might accrue may fluctuate and may 

rise or fall. Nothing in this report constitutes investment, legal, accounting or tax advice, 

or a representation that any investment or strategy is suitable or appropriate to individual 

circumstances, or otherwise constitutes a personal recommendation to any specific investor. 

Any reference to past performance is not necessarily indicative of future results. 

Foreign currency rates of exchange may adversely affect the value, price or income of any 

products mentioned in this document. Alternative investments, derivative or structured 

products are complex instruments, typically involve a high degree of risk and are intended 

for sale only to investors who are capable of understanding and assuming all the risks 

involved. Investments in emerging markets are speculative and considerably more volatile 

than investments in established markets. Risks include but are not necessarily limited to: 

political risks; economic risks; credit risks; currency risks; and market risks. An investment 

in the funds described in this document should be made only after careful study of the 

most recent prospectus and other fund information and basic legal information contained 

therein. Prospectuses and other fund information may be obtained from the fund management 

companies and/or from their agents. Before entering into any transaction, investors 

should consider the suitability of the transaction to individual circumstances and objectives. 

Credit Suisse recommends that investors independently assess, with a professional financial 

advisor, the specific financial risks as well as legal, regulatory, credit, tax and accounting 

consequences. A Credit Suisse company may, to the extent permitted by law, participate 

or invest in other financing transactions with the issuer of the securities referred to 

herein, perform services or solicit business from such issuers, and/or have a position or 

effect transactions in the securities or options thereof. 

Distribution of research reports 

Except as otherwise specified herein, this report is distributed by Credit Suisse, a Swiss 

bank, authorized and regulated by the Swiss Financial Market Supervisory Authority. 

Australia: This report is distributed in Australia by Credit Suisse, Sydney Branch (CSSB) 

(ABN 17 061 700 712 AFSL 226896) only to “Wholesale” clients as defined by s761G of 

the Corporations Act 2001. CSSB does not guarantee the performance of, nor makes any 

assurances with respect to the performance of any financial product referred herein. 

Bahamas: This report was prepared by Credit Suisse, the Swiss bank, and is distributed 

on behalf of Credit Suisse, Nassau Branch, a branch of the Swiss bank, registered as a 

broker-dealer by the Securities Commission of the Bahamas. Bahrain: This report is distributed 

by Credit Suisse, Bahrain Branch, authorized and regulated by the Central Bank 

of Bahrain (CBB) as an Investment Firm Category 2. Dubai: This information is distributed 

by Credit Suisse Dubai branch, duly licensed and regulated by the Dubai Financial Services 

Authority (DFSA). Related financial products or services are only available to wholesale 

customers with liquid assets of over USD 1 million who have sufficient financial 

experience and understanding to participate in financial markets in a wholesale jurisdiction 

and satisfy the regulatory criteria to be a client. France: This report is distributed by 

Credit Suisse (France), authorized by the Comité des Etablissements de Crédit et des 

Entreprises d’Investissements (CECEI) as an investment service provider. Credit Suisse 

(France) is supervised and regulated by the Commission Bancaire and the Autorité des 

Marchés Financiers. Germany: Credit Suisse (Deutschland) AG, authorized and regulated 

by the Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin), disseminates research 

to its clients that has been prepared by one of its affiliates. Gibraltar: This report is distributed 

by Credit Suisse (Gibraltar) Limited. Credit Suisse (Gibraltar) Limited is an independent 

legal entity wholly owned by Credit Suisse and is regulated by the Gibraltar Financial 

Services Commission. Guernsey: This report is distributed by Credit Suisse (Guernsey) 

Limited. Credit Suisse (Guernsey) Limited is an independent legal entity wholly owned by 

Credit Suisse and is regulated by the Guernsey Financial Services Commission. Copies of 

annual accounts are available on request. Hong Kong: This report is issued in Hong Kong 

by Credit Suisse Hong Kong branch, an Authorized Institution regulated by the Hong Kong 

Monetary Authority and a Registered Institution regulated by the Securities and Futures 

Ordinance (Chapter 571 of the Laws of Hong Kong). India: This report is distributed by 

Credit Suisse Securities (India) Private Limited (“Credit Suisse India”), regulated by the 

Securities and Exchange Board of India (SEBI). Italy: This report is distributed in Italy by 

Credit Suisse (Italy) S.p.A., a bank incorporated and registered under Italian law subject 

to the supervision and control of Banca d’Italia and CONSOB. Luxembourg: This report is 

distributed by Credit Suisse (Luxembourg) S.A., a Luxembourg bank, authorized and 

regulated by the Commission de Surveillance du Secteur Financier (CSSF). Mexico: The 

information contained herein does not constitute a public offer of securities as defined in 

the Mexican Securities Law. This report will not be advertised in any mass media in 

Mexico. This report does not contain any advertisement regarding intermediation or providing 

of banking or investment advisory services in Mexico or to Mexican citizens. Qatar: This 

information has been distributed by Credit Suisse Financial Services (Qatar) L.L.C, which 

has been authorized and is regulated by the Qatar Financial Centre Regulatory Authority 

(QFCRA) under QFC No. 00005. All related financial products or services will only be 

available to Business Customers or Market Counterparties (as defined by the Qatar Financial 

Centre Regulatory Authority (QFCRA)), including individuals, who have opted to be 

classified as a Business Customer, with liquid assets in excess of USD 1 million, and who 

have sufficient financial knowledge, experience and understanding to participate in such 

products and/or services. Russia: The research contained in this report does not constitute 

any sort of advertisement or promotion for specific securities, or related financial instruments. 

This research report does not represent a valuation in the meaning of the Federal 

Law On Valuation Activities in the Russian Federation and is produced using Credit Suisse 

valuation models and methodology. Singapore: Distributed by Credit Suisse Singapore 

branch, regulated by the Monetary Authority of Singapore. Spain: This report is distributed 

in Spain by Credit Suisse Spain branch, authorized under number 1460 in the Register 

by the Banco de España. United Kingdom: This report is issued by Credit Suisse (UK) 

Limited and Credit Suisse Securities (Europe) Limited. Credit Suisse Securities (Europe) 

Limited and Credit Suisse (UK) Limited, both authorized and regulated by the Financial 

Services Authority, are associated but independent legal entities within Credit Suisse. The 

protections made available by the Financial Services Authority for retail clients do not apply 

to investments or services provided by a person outside the UK, nor will the Financial 

Services Compensation Scheme be available if the issuer of the investment fails to meet 

its obligations. 

UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOF MAY BE SENT, 

TAKEN INTO OR DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON. 

Japan: Neither this report nor any copy thereof may be sent, taken into or distributed in 

Japan. 

Local law or regulation may restrict the distribution of research reports into certain jurisdictions. 

This report may not be reproduced either in whole or in part, without the written permission of 

Credit Suisse. Copyright © 2009 Credit Suisse Group AG and/or its affiliates. All rights 

reserved. 

9C015A

GLOBAL INVESTOR 2.09 Service — 56 

Photos: Martin Stollenwerk 

2.09_Authors 

Credit Suisse Global Research 

Responsible for coordinating the focus 

themes in this issue: 

Reto Hess is a senior research 

analyst in Global Research at Credit 

Suisse Private Banking, covering 

the European automotive and capital 

goods sectors, and is responsible 

for Swiss equities strategy. 

Before joining Credit Suisse in 2008, 

he worked as a portfolio manager 

at Bank Sal. Oppenheim (Switzerland) 

Ltd. He is a CFA charterholder and has 

an MA from the University of Zurich. 

Gregory Fleming joined Credit Suisse 

Global Research in 2006 as a senior 

analyst for the Investment Decision 

Cockpit (IDC). Prior to Credit Suisse, 

he worked in asset allocation and 

portfolio strategy roles for Westpac 

Investment Management and Grosvenor 

Financial Services Group, and 

for the International Textile Manufacturers 

Federation as global economist. 

He holds an MA with Distinction 

in Economic History from the University 

of Canterbury, New Zealand. 

Dr. Pierre-Yves Bolinger ..................... 

Research Analyst ................................................. 

+41 44 334 00 94 ............................................... 

pierre-yves.bolinger@credit-suisse.com ................. 

Pierre-Yves Bolinger joined Credit Suisse Private 

Banking in 2008 as an equity analyst for 

the alternative energy and nanotechnology 

sector. He also contributes to the analysis of 

various sustainability themes, including agriculture. 

He worked as postdoctoral researcher in 

the Nano-Science Center of the University of 

Copenhagen and then as project manager in a 

Danish start-up company active in clean technology. 

He holds a Master’s degree in Physical 

Chemistry and a PhD in Nanotechnology from 

the Swiss Federal Institute of Technology in 

Lausanne. > Pages 36–39 

Cédric Spahr, CFA, CAIA ..................... 

Head of Alternative Investment Research and 

Portfolio Analytics ................................................ 

+41 44 333 96 48 ............................................... 

cedric.spahr@credit-suisse.com ............................ 

Cédric Spahr joined Credit Suisse in 2000. He 

heads the Alternative Investment Research and 

Portfolio Analytics team. From 2002 to 2006, 

he worked on the Equity Strategy team in the 

Global Research division of Credit Suisse. He 

joined the Economic Research Department 

of Credit Suisse in 2000 as senior economist, 

analyzing the US economy and global forex 

markets. He has an MA in Economics from the 

University of St. Gallen in Switzerland and is a 

chartered financial analyst. > Pages 40–41 

Reto Meneghetti, CAIA ....................... 

Research Analyst .................................................. 

+41 44 334 12 93 ............................................... 

reto.meneghetti@credit-suisse.com ....................... 

Reto Meneghetti joined Credit Suisse in 2006 

as an alternative investment analyst with 

primar y focus on private equity, hedge funds 

and portfolio analytics. In 2005, he received 

his Master’s degree in Quantitative Economics 

and Finance from the University of St. Gallen. 

He has also worked as an auditor for 

Ernst & Young on national and international 

mandates. > Pages 40–41 

Lars Kalbreier, CFA ............................. 

Head of Global Equities and Alternatives Research .. 

+41 44 333 23 94 ............................................... 

lars.kalbreier@credit-suisse.com ........................... 

Lars Kalbreier is a Managing Director and 

Global Head of Equity and Alternatives Research 

at Credit Suisse. Prior to this position, 

he headed the Trading Strategy Group at 

Credit Suisse. Before joining Credit Suisse 

in 2002, he held various positions within investment 

banking and investment management 

at JPMorgan in London. He holds an MSc 

in Finance and Business Administration from 

HEC Lausanne and is a chartered financial 

analys t. > Pages 42–44 

Roger Signer, CFA .............................. 


+41 44 335 72 98 ............................................... 

roger.signer@credit-suisse.com ............................. 

Roger Signer joined Credit Suisse Global 

Research in 2004. His areas of research are 

equity derivatives, equity investment themes 

and convertible bonds. In addition, he covers 

the construction materials sector. He holds 

a Master’s in Economics and Finance from the 

University of St. Gallen and is a CFA charterholder. 

> Pages 42–44 

Eric Güller, CEFA ................................ 

Head of Emerging Markets ex Asia & Thematic 

Research .............................................................. 

+41 44 332 90 59 ............................................... 

eric.gueller@credit-suisse.com .............................. 

Eric Güller is Head of Emerging Markets 

ex Asia & Thematic Research at Credit Suisse 

Privat e Banking. He joined Credit Suisse in 

2004 as a senior analyst and started to build 

up the local research franchise in the Middle 

East, India and Eastern Europe from 2008 

onwar ds. Before joining Credit Suisse, he 

worked as a senior analyst at the state-owned 

Zürcher Kantonalbank and at Swiss Re. He is 

a Certified European Financial Analyst (CEFA) 

and holds a Master’s in Economics from the 

University of Zurich. > Pages 45–47 

Robert Ruttmann ................................ 


+41 44 334 25 38 ............................................... 

robert.ruttmann@credit-suisse.com........................ 

Robert Ruttmann is an equity analyst covering 

Africa. He completed his undergraduate education 

in economics at Bates College, in 

Maine, USA, and holds a Master’s in International 

Affairs and a Master in Banking and 

Finance from the University of St. Gallen. His 

professional and research experience includes 

working for the European Commission in 

the Department of Economic and Financial 

Affairs and for a bank in portfolio management. 

> Pages 45–47 

Dr. Nannette Hechler-Fayd’herbe ....... 

Head of Global Fixed Income and Credit Research .. 

+41 44 333 17 06 ................................................ 

nannette.hechler-fayd’herbe@credit-suisse.com ..... 

Nannette Hechler-Fayd’herbe has 0een Head 

of Global Fixed Income and Credit Research at 

Credit Suisse Private Banking since 2006. She 

joined the firm in 1999 as Head of Swiss Fixed 

Income and Credit Research for Credit Suisse 

First Boston. Previously, she was responsible 

for strategy and investment advice at UBS 

Warburg and Warburg Dillon Read in Switzerland. 

She has a PhD from the University 

of Lausanne and is a graduate of the Ecole 

des Hautes Etudes en Sciences Sociales 

in Paris. > Pages 48–49 

Ulrich Kaiser, CEFA ............................. 

Research Analyst .................................................. 

+41 44 334 56 49 ............................................... 

ulrich.kaiser@credit-suisse.com ............................. 

Ulrich Kaiser is an equity sector analyst in the 

Global Equity Research team at Credit Suisse 

Private Banking covering the IT services and 

software, hardware, and media sectors. He 

joined Credit Suisse in 1993, initially working 

in Japanese Equity Research. He holds 

a Master’s in Economics from the University 

of Constance. > Pages 50–53 

Steffen Sabas ..................................... 

Research Assistant ............................................... 

+41 44 334 54 94 ............................................... 

steffen.sabas@credit-suisse.com .......................... 

Steffen Sabas joined Credit Suisse in 2008. 

Before joining the Global Equity Research 

team as an equity analyst for the US media 

sector, he worked on the Credit Suisse Coverage 

& Investment Initiatives EMEA desk. He 

holds a BSc in International Business Management 

from the Amsterdam School of Business 

and Economics. > Pages 50–53

Global Investor 2.08/US edition, March 2008 


 

Order GI 

Since the outset of 2008, we have combined the best of our two former magazines – 

Global Investor and Global Investor Focus – into one new publication, which 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 and 

Global Investor Focus 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. 







Luis Felipe Derteano, ACP Group A business model that provides the tools to 


GI 1.08 

Frontier Markets 

GI 2.08 


GI 3.08 

Return to a 

multipolar world 

GI 1.09 

Building investment 

strategies 

Imprint 

Credit Suisse, Global Research, 

P.O. Box 300, CH-8070 Zurich 

Publisher 

Giles Keating 

Editors 

Reto Hess, Gregory Fleming, Ulrich Kaiser 

Editorial deadline 

30 September 2009 

Production management 

Markus Kleeb, Katharina Schlatter 

Concept, design and realization 

www.arnold.inhaltundform.com 

Michael Suter, Zoe Arnold, Michele Iseppi, 

Nadia Bucher (Project Management) 

While traditional emerging 

countries are increasingly 

resembling the developed 

nations, investors are 

zeroing in on the so-called 

frontier markets, which 

are defi ned as regions that 

are treading in an earlier 

stage of development than 

the emerging markets. 

These frontier markets 

offer enormous potential, 

but also harbor risks. 

High-profi le personalities 

present their assessments 

on the topic and, in the 

process, provide a better 

understanding of the 

promising opportunities 

in these markets. 

The fi ght against economic 

exclusion of the world’s 

poorest people is no longer 

the preserve of government 

and charitable aid. Today, 

their work is complemented 

by private sector initiatives 

that use business methods 

to combat poverty – and 

by pure profi t-driven capital 

fl ows. Lima-based ACP 

Group, for example, is a 

pioneer in promoting development 

via a business 

ethos. In this issue of 

Global Investor, we offer 

a roadmap through the 

new range of “socially 

respon sible investments,” 

which offer a combination 

of fi nancial and 

social returns. 

Emerging markets are 

feeling the global slowdown 

as export demand 

has dropped sharply, 

capital has fl own and commodity 

prices have corrected. 

These trends are 

all negative for commodity 

exporters. Nevertheless, 

these countries still enjoy 

longer-term structural 

growth opportunities. The 

world continues to move 

in a multipolar direction, 

with a more even distribution 

of global economic 

power and wealth. 

The fi nancial crisis has 

created uncertainty for investors 

around the globe. 

The value of many assets 

has decreased in the wake 

of volatile markets and a 

global recession arising 

from the crisis. The turbulent 

phases in the cycle 

require an enhanced or 

even new set of risk management 

tools. Given the 

uncertainties associated 

with risk, building solid 

inves tment strategies is 

both a science and an art. 

In this edition of Global 

Inves tor, we examine the 

theory and practice of 

inves tment strategy in the 

context of the advisory 

process. 

Editorial support 

Zoe Arnold, James Gavin, Ian Lewis 

Printer 

Feldegg AG, Zollikerberg 

Photo cover 

Mathias Hofstetter, istockphoto.com, Corbis 

Copies of this publication may be ordered via your 

customer advisor; employees contact Netshop 

directly. This publication is available on the Internet 

at: www.credit-suisse.com/research. 

Intranet access for employees of Credit Suisse 

Group: http://research.csintra.net. 

International research support is provided by 

Credit Suisse’s global network of representative 

offi ces.

www.credit-suisse.com/research 

GIE 2514174



Investment Ideas 

A selection of investment recommendations based on broader themes 

presented in Global Investor, with special emphasis on the three 

global megatrends: the demographic challenge, the move to a multipolar 

world and the need for sustainability.



The following Investment Ideas have been 

compiled within the scope of the GI 2.09 topics. 

Therefore, the articles from the GI 2.09 have 

been summarized to provide brief background 

knowledge of the relevant Investment Idea. And 

for those who would like to know more, the 

original passage in GI 2.09 can be found quickly 

and simply thanks to the page references. 



The GI 2.09 can be obtained at 

www.credit-suisse.com/shop. 


global market in green technologies. Zhouying Jin How to make the transition 

from “Made in China” to “Created in China”. Ray Kurzweil The acceleration 


to match and even exceed human intelligence. Richard Watson We have the 

power to shape the future by looking at the present.

INDEX 

Search 

for topics 

Search 

for recommendations 

RECOMMENDATIONS 

BUY HOLD 

PAGE 

TOPICS 

RECOMMENDATIONS 

PAGE 

BUY HOLD 

TOPICS 

America Movil 05 

Emerging brands 

America Movil 

05 Emerging brands 

Anta Sports 

Anta Sports 


China Construction Bank 

ASML 

14 Investing in nanotechnology 

Emaar Properties 

China Construction Bank 


LG Display 

Citrix Systems 

13 Cloud computing’s future 

Suntech Power Holdings Co. 

CS Global Nanotechnology Index 


Emirates Telecom 07 


Daimler 

09 Car electrification on track 

Millicom 

Emaar Properties 


MTN 

Emirates Telecom 

07 Connecting the unconnected 

Orascom Telecom 

France Telecom 

15 CHF bonds in focus 

Telecom Egypt 

Fresenius Medical Care 

08 Healthcare for the elderly 

ZAIN 

Gamesa Corporacion Tecnologica 

11 Green energy firms 

Fresenius Medical Care 08 

Healthcare for the elderly 

Google 


Medtronic 

Intel 


Novartis 

Johnson Matthey 


Roche 

LG Display 


Synthes 

Medtronic 


Teva 

Meyer Burger Technology 


Daimler 09 

Car electrification on track 

Microsoft 


Saft Groupe 

Millicom 


Gamesa Corporacion Tecnologica 11 

Green energy firms 

MTN 


Meyer Burger Technology 

Novartis 


Suntech Power Holdings Co. 

Orascom Telecom 


Citrix Systems 13 

Cloud computing’s future 

Philip Morris 


Google 

Roche 


Intel 

Royal Bank of Scotland 


Microsoft 

Saft Groupe 

09 Car electrification on track 

Salesforce.com 

Salesforce.com 


VMware 

Suntech Power Holdings Co. 


ASML 14 

Investing in nanotechnology 


CS Global Nanotechnology Index 

A product tracking the Swiss Re 

15 Insurance-linked strategies 

Johnson Matthey 

Cat Bond Total Return Index 

A product tracking the Swiss Re 15 

Insurance-linked strategies 

Synthes 


Cat Bond Total Return Index 

Telecom Egypt 


France Telecom 15 

CHF bonds in focus 

Teva 


Philip Morris 

VMware 


Royal Bank of Scotland 

ZAIN 

07 Connecting the unconnected


GI 2.09 see pages 36–39 

Electric vehicles are drawing increasing attention 

from media due to climate change awareness 

and oil shortage issues. But are they a 

meaningful solution once implemented on a 

large scale? The forecasts for the future market 

share of electric vehicles vary considerably, 

mainly due to different opinions about 

the improvement in battery technologies. In 

our view, electric vehicles will have a very attractive 

and sustainable future once the infrastructure 

has been set up and batteries enable 

good performance at a reasonable price. 

In this respect, we expect to see a fast improvement 

in cost reduction and performance 

of the different technologies, leading to an 

acceleration in the implementation of electric 

vehicles. Hence, we think companies involved 

in building these vehicles in the early stages 

are likely to benefit from early mover advantages 

and generous government subsidies. 

New asset class linked to natural 

disaster risks GI 2.09 see pages 40–41 

Providing insurance coverage for large-scale 

natural disasters requires well-capitalized insurance 

companies. Some of these natural 

disaster risks are transferred to financial investors 

who, in past years, have earned attractive 

returns. The insurance industry has 

experienced substantial capital destruction 

during the credit crisis of 2008 and underwriting 

capacity has shrunk. Historically, capital 

scarcity and high insurance premiums have 

offered attractive entry points for investors in 

insurance-linked strategies. Given the inevitability 

of natural disasters and therefore years 

with low or possibly negative returns, cat 

bonds and ILS investments are by definition a 

long-term investment. Nevertheless, the asset 

class could offer attractive returns and diversification 

potential in the future, as the insurance 

industry expands its use of this market 

to manage risk exposure and reduce capital 

requirements. 

Cloud computing – the future of 

corporate IT GI 2.09 see pages 50–53 

Cloud computing is where scalable and virtualized 

resources are provided as a service 

over the internet, enabling users to spend 

more time online, and integrating internetrelated 

tasks such as search, eCommerce 

and media consumption. While consumers 

are familiar with this technology, corporates 

have been lagging behind mainly for security 

reasons. We think the emergence of 

low-cost commodity hardware, increased 

speed and security, and the corporate need 

to manage costs will change all this. Data 

centers are becoming factories for computing 

services on an industrial scale; software 

is increasingly being delivered as an online 

service; and wireless networks connect 

more and more devices to such offerings. 

Market research company Gartner estimates 

that worldwide cloud service revenue 

will not only surpass USD 56 billion this 

year, but will surge to just over USD 150 

billion in 2013. 

Renaissance of Swiss franc bonds 


The last thirty years have been marked by a 

general decline of the Swiss franc as an international 

reserve and safe-haven currency. 

However, uncertainty about inflation and 

credit quality, and re-emerging differences in 

countries’ monetary and fiscal track records 

are weighing on traditional international fixed 

income investment targets, and could well restore 

the status of the Swiss franc as a value-preservation 

vehicle and potentially re-ignite 

its long-term structural appreciation 

trend. In their quest for value preservation, 

we expect international investors to look 

more to CHF-denominated bonds again. We 

think favorable inflation and fiscal perspectives 

compared to the rest of the developed 

countries should sustain the outperformance 

of the Swiss bond market in an environment 

of generally rising yields, underscored by a 

positive currency outlook. The Swiss bond 

market offers diversity and improving liquidity, 

with a trend toward more and bigger issuers. 

Desert power and the global energy 

equation GI 2.09 see pages 42–44 

In summer 2009, 14 companies decided to 

join forces in a major initiative that could 

meet up to 15% of Europe’s electricity demand 

and change the global energy equation. 

The Desertec Initiative plans to satisfy 

a large share of Europe’s electricity demand 

with several solar thermal power plants in 

the Northern African desert (Morocco, Algeria, 

Tunisia, Egypt and others). Besides 

the impact on Europe’s energy equation, 

the Desertec Initiative also has the potential 

to alter the geopolitical balance in two distinct 

ways. First, ties between North Africa 

and Europe could become closer from more 

economic interaction and security collaboration. 

Second, a certain rebalancing of power 

within the Middle East North Africa 

(MENA) region could take place, away from 

the oil rich gulf countries. Desertec could 

also spur similar projects in other regions, 

providing a new driver for alternative energy 

sources. 

Building on Africa’s promise 


Africa’s oil and gas wealth ranks third globally, 

with 8% of the world’s gas reserves 

and 9% of oil reserves. Its commodity 

wealth extends to industrial and precious 

metals, with substantial reserves of bauxite, 

cobalt, gold, diamonds, platinum group 

metals, vermiculite and zirconium. Governments 

and companies are aware that Africa’s 

productivity is still limited by insufficient 

infrastructure, and will need to invest in reducing 

transport bottlenecks and electricity 

supply outages. In addition, Africa has the 

world’s lowest mobile penetration rate and 

the highest subscriber growth rate. While 

the extent to which African and foreign entrepreneurs 

can capitalize on the potential 

in these key sectors will be crucial for the 

continent’s long-term economic growth outlook, 

we nevertheless believe the prospects 

of Africa evolving into the next generation 

of emerging markets remain promising.

Megatrends: The demographic challenge 


Rapid population growth in emerging markets 

and increasing ageing, mainly in developed 

markets, represent the starting point of 

the current cycle of megatrends. The world’s 

population has more than doubled in the past 

40 years to currently 6.3 billion, the strongest 

pace of population growth recorded in 

history, on the back of improved technological, 

sanitary and medical conditions. The 

United Nations forecasts that global population 

will grow by another 50% by 2050. 

Moreover, the number of people aged 60 

and over is expected to rise from the approximately 

600 million reported in 2000 to two 

billion in 2050. According to the UN, this will 

translate into new challenges in the fields of 

economy, health and work, and for society 

as a whole. Clearly, governments and companies 

alike must recognize and respond to 

this demographic challenge. 

Megatrends: Moving to a multipolar world 


The world is becoming increasingly multipolar 

as global wealth spreads rapidly from the 

developed to the emerging world. Between 

1990 and 2007, global trade has soared 

by almost 300% to USD 9,500 billion. As 

a result of accelerating globalization, more 

emerging market countries are participating 

in the global economy. Their citizens 

are becoming wealthier and will, to a large 

extent, live in urban centers of “emerging 

cities,” rather than in rural areas. Emerging 

market companies are growing stronger 

and more resourceful with respect to both 

know-how and technology. All this, in turn, 

is increasing the importance of emerging 

markets globally, both from a political 

and an economic point of view. It is in this 

sense no coincidence that G8 meetings are 

increasingly becoming G20 meetings, thus 

including major emerging market countries. 

Megatrends: The need for sustainability 


Demand for resources is growing rapidly on 

the back of population growth and enrichment: 

for instance, between 1950 and 2000, 

oil demand increased sevenfold, and aluminum 

demand increased by 15 times. In the 

coming years, this trend is expected to further 

accelerate due to the rapid development of 

emerging markets. But, at the same time, 

reserves of resources are limited. Rising demand 

and depleting resources are leading to 

imbalances in an increasing number of areas. 

A recent UN study, for instance, estimates 

that, at current consumption levels, two thirds 

of the world population will suffer from water 

scarcity by 2025. One key solution to restore 

the balance between supply and demand is 

the sustainable generation of resources as 

well as more efficient use of existing resources, 

which will lead to the development of new 

industries (cleantech, nanomaterials, etc.). 

Innovation 


Throughout history, mankind has addressed 

challenges with an unparalleled ability to 

adapt, often overcoming hardship through 

innovation. Moreover, there have been numerous 

occasions where “experts” predicted 

that megatrends would never develop, 

only to be proven wrong as they consistently 

underestimated the power of innovation 

and its strong role in shaping future megatrends. 

While innovation is not a megatrend 

of its own, it is an important subtrend of the 

sustainability megatrend. Going forward, innovations 

in the field of genetics, robotics 

and nanotechnology (GRN), among others, 

are likely to play a major role in pushing the 

current megatrends to new frontiers. We 

expect the megatrends linked to the three 

pillars – demographics, a multipolar world 

and sustainability – to significantly alter the 

world we live in, and also create significant 

investment opportunities, which Credit 

Suisse will be monitoring closely.

GLOBAL INVESTOR 2.09 Investment Ideas — 4 


Original equipment manufacturers dominate China’s exports 

Leveraging the country’s traditional low-cost base advantage, Chinese manufacturers have won significant global market share over the 

past 30 years. But “Made in China” is at a crossroads. Despite growing penetration from high-tech products, 90% of Chinese product 

exports are dependent on the processing trade or original equipment manufacturers (OEMs). The challenge is to build on these undoubted 

strengths in order to capture the value-added.


Emerging brands 

GI 2.09 see page 16 

Anta Sports 

BUY 

2020 HK | One of the largest Chinese domestic sportswear 

brands focused on design and brand marketing. 

China Construction Bank 

939 HK | One of the largest commercial banks in China. 

BUY 

LG Display 

BUY 

034220 KS | Leading manufacturer of display panels based 

in Korea. 

America Movil 

AMXL MM | Leading Latin American cell phone provider. 

BUY 


STP US | Major Chinese solar player with attractive longterm 

growth prospects. 

Emaar Properties 

EMAAR UH | Champion property developer in the Middle 

East and other frontier markets. 

BUY 

BUY 

Building on resilient domestic consumers, EM companies are well 

positioned to become the next global brands. 

In an increasingly multipolar world, EM brands will likely become an 

integral part of the global lifestyle. 

EM consumer keeps spending 

While Western consumers have started saving and de-leveraging, EM consumption 

continues to grow, even during the global recession. 

Source: Bloomberg, Credit Suisse 

 

 

Brands like Coca Cola, Mercedes or Sony 

are widely recognized around the globe, and 

offer a strong competitive advantage for the 

respective companies. Among the owners of 

the world’s most valuable brands, we find 

mainly US and some Japanese and European 

companies – so far. With the trend toward 

a multi-polar world and the rise of the 

emerging markets (EM) consumer, we now 

see the emergence of new global brands 

that have their origins in EM, similar to the 

development of Japanese brands in the 

1970s. Accelerating consumption trends in 

EM are a key driver for EM companies to 

fuel their rise to become global brands. The 

wealth effect continues in EM on resilient 

economic growth, and an increasing number 

of individuals set to pass the income thresholds 

triggering discretionary spending. The 

World Bank predicts that the number of EM 

middle class will increase by 800 million by 

2030. These trends will likely favor companies 

with a strong footprint in these countries. 

Many candidates to become the next 

global brands are already well positioned in 

EM, but still have some way to go to become 

global brands. Anta Sports, a Chinese 

sportswear producer, for instance, is already 

experiencing rapid sales growth, mainly driven 

by Chinese consumers. Other emerging 

brands in consumer electronics or household 

appliances are steadily finding their footing 

in developed markets. So, as the world becomes 

increasingly multi-polar, this is also 

likely to be reflected in the brands that we 

rely on in our daily shopping and business 

decisions. – 

 

 

 

 

 

 

 

Eric Güller, CEFA, Head Emerging Markets ex Asia 

& Thematic Research 

+41 44 332 90 59, eric.gueller@credit-suisse.com 

Roger Signer, CFA, Research Analyst 

+41 44 335 72 98, roger.signer@credit-suisse.com


Photo: istockphoto.com 

Attractive African telecom market 

While today still only 40 of every 100 Africans have access to a mobile phone, this ratio has started to increase fast in recent years. 

In 2008, Africa had the fastest-growing telecom market in the world, with mobile companies signing up nearly 90 million new subscribers 

across the continent in just one year.




MTN 

MTN SJ | Leading mobile operator in Africa, active in 

16 African countries, with market leading positions in 13 

of these countries. 

Emirates Telecom 

BUY 

BUY 

ETISALAT UT | Strong growth strategy in Africa, with 

30% of its revenue already coming from its operations in 

11 African countries. 

Orascom Telecom 

BUY 

ORTE EY | Leading emerging market telecom firm, active in 

Asia and Africa, with 50% of sales from Africa. 

Telecom Egypt 

BUY 

ETEL EY | Dominant fixed-line operator in fast-growing 

Egypt, with a 45% stake in Egypt’s leading mobile operator, 

and strong cash flows. 

ZAIN 

BUY 

ZAIN KK | A first-mover in the African telecom market, 

already active in 16 African countries, with leading market 

positions in 7 countries. 

Millicom 

HOLD 

MICC US | Rapidly expanding mobile operator in Africa, 

already active in 8 African countries, with sales from Africa 

growing to 22% of total. 

Africa remains the world’s fastest-growing mobile telecom 

market, with telecom firms adding around 90 million new subscribers 

in 2008 – an amount equivalent to the German population. 

Despite this growth, the region still offers significant opportunities 

since subscriber penetration levels are still the lowest in the world at 

only 40%. 

Africa is the world’s fastest growing telecom 

market. In 2008 alone, mobile companies 

in Africa signed up nearly 90 million new 

subscribers in just one year. This amount is 

larger than the population of Germany, and 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

represents a yearly subscriber growth rate of 

33%. Looking ahead, we expect mobile subscriber 

growth rates in Africa to average 19% 

per year through 2014, the fastest expected 

growth rate in the world. Naturally, these 

The African telecom market remains attractive 

Africa has the world’s fastest growing telecom market and still the world’s lowest 

penetration rate characteristics. Source: Cowan and Company, Informa Telecoms and Media, Credit Suisse 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

rapid growth rates are possible because Africa 

still has the lowest penetration rate in the 

world, with today only 40 out of every 100 

Africans having access to a mobile phone 

– this despite the continent’s rapid subscriber 

growth rates in recent years. Looking ahead, 

we expect Africa’s mobile penetration rate to 

grow very fast, reaching 80% by 2014, representing 

350 million additional subscribers 

from today’s levels. These rapid growth prospects 

are due to the uniquely important role 

the mobile phone has taken on in the African 

context. For instance, phones substitute 

for travel, making up for poor infrastructure; 

they also allow for a more efficient distribution 

of market information, allowing traders to 

engage in wider markets and many Africans 

use phones to transfer money and pay bills, 

making up for limited banking facilities. With 

these growth prospects, a number of domestic 

and international telecom companies 

continue to increase their exposure to this 

emerging continent. We recommend buying 

companies with broad-based exposure to 

Africa’s growth markets, such as MTN, Orascom 

Telecom, Zain and Etisalat. – 

Eric Güller, CEFA, Head Emerging Markets ex Asia 

& Thematic Research 

+41 44 332 9059, eric.gueller@credit-suisse.com 

Robert Ruttmann, Research Analyst 

+41 44 334 2568 robert.ruttmann@credit-suisse.com


Healthcare for the elderly 


Roche 

ROG VX | Roche offers a unique oncology portfolio 

combined with a promising pipeline. 

BUY 

Novartis 

NOVN VX | Novartis is benefiting from the solid growth of 

its rejuvenated product portfolio. 

BUY 

Teva 

TEVA US | The largest generics company is set to benefit 

from a push towards more affordable healthcare. 

BUY 

Synthes 

SYST VX | Market leader in trauma and number two 

worldwide in spine. 

BUY 

Fresenius Medical Care 

BUY 

FME GR | World leader in dialysis products and services for 

the treatment of end-stage renal disease. 

Medtronic 

BUY 

MDT US | Diversified medtech company with a leading 

position in cardiac devices and insulin pumps. 

The share of the world’s population aged above 65 years is expected 

to double in the coming decades. 

Elderly people are more likely to develop chronic illnesses, such as 

cardiovascular disease, cancer, and diabetes. 

 

 

Advances in medical care have contributed to 

a significant increase in life expectancy during 

the past century. In combination with a 

declining fertility rate, this led to a shift in the 

world’s demographic profile toward an aging 

population, an effect which will gain importance 

in the coming decades. According to 

the US Census Bureau, the world population 

aged above 65 years is projected to double in 

the period from 2000 to 2030, increasing 

from 7% to 12% worldwide. This is true not 

only for the developed world but also for the 

Projected demographic profile, developed countries 

In developed countries, the share of people aged over 65 is expected to reach 20% by 

2050. A similar trend is also true for developing countries, albeit from a lower base. 

Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2008 

Revision, New York, 2009 (advanced Excel tables) 

developing countries, where the number of 

persons above 65 years is expected to nearly 

triple. 

Simultaneously, there has been a shift in 

the leading causes of death from infectious 

disease and acute illness to chronic disease 

and degenerative illness. Older adults are 

more likely to have chronic illness, resulting in 

costs that are three to five times higher than 

for people aged less than 65 years. In a developed 

country such as the USA, cardiovascular 

disease, cancer, stroke and diabetes 

are the main reasons for death in the elderly 

population. Other age-related diseases include 

arthritis, Alzheimer’s disease, osteoporosis 

and cataracts. 

As a result, the addressable market for 

healthcare companies is expanding at a higher 

rate than world population growth, depending 

on the indication. We thus recommend 

investing in a diversified portfolio of healthcare 

companies which are set to benefit from 

the trend towards an aging population. These 

include pharmaceutical companies, generic 

manufacturers and manu facturers of medical 

devices. – 

 

 

 

 

 

 

Dr. Thomas C. Kaufmann, Research Analyst 

+41 44 334 88 38, thomas.c.kaufmann@credit-suisse.com 

Dr. Grégoire Biollaz, Research Analyst 

+41 44 334 56 37, gregoire.biollaz@credit-suisse.com


Car electrification on track 


Daimler 

DAI GY | With its technological know-how and collaborations 

(Evonik, Tesla), we expect Daimler to produce 

attractive EVs. 

BUY 

Saft Groupe 

SAFT FP | Saft is a leading battery producer with high 

performance battery know-how and advanced Li-ion 

technologies. 

BUY 

Cost reduction and improvement in battery technologies is key for 

electric vehicles to enter the mass market. 

The prospects for electric vehicles (EV) are 

very sound, given their superior efficiency 

compared to combustion engines (fewer 

moving parts), less pollution (no harmful oxides 

emission) and lower dependency on oil 

(assuming primary energy from renewable 

sources). As current battery technology is 

not yet able to power the vehicles over long 

distances, and adequate infrastructure is 

not yet available, we expect hybrid cars to 

gain the most ground over the next few 

years until we see a breakthrough in battery 

technology (range, costs). Leading battery 

producers like Saft Groupe will be the main 

beneficiaries of the increase in cars’ electrification 

as batteries are key for the success 

of both technologies. Technology-leading 

automakers, such as Toyota (hybrid cars) or 

Renault/Nissan (EVs), will benefit from a 

first-mover advantage, but we expect companies 

with a smart collaboration strategy 

(e.g. Daimler/Evonik) to close the gap very 

fast and with lower development costs. – 

Global electric vehicle unit forecasts 2008–2015 

We expect demand for electric vehicles to rise, mainly driven by breakthroughs in 

technology (batteries), growth in charging infrastructure as well as government support. 

Source: Frost & Sullivan, Credit Suisse 

 

 

 

 

 

 

 

 

 

 

Dr. Pierre-Yves Bolinger, Equity Research Analyst 

+41 44 334 00 94, pierre-yves.bolinger@credit-suisse.com 

Reto Hess, CFA, Equity Research Analyst 

+41 44 332 87 20, reto.hess@credit-suisse.com 

Marc-Antoine Haudenschild, Equity Research Analyst 

+81 3 4450 5132, 

marc-antoine.haudenschild@credit-suisse.com


Photo: Solar Millennium AG/Paul Langrock 

Green Energy 

If Desertec succeeds in exploiting the comparative advantages of North African solar energy, while Europe focuses more on wind (along 

the shore) and hydroelectric (in the mountains), this would mean that energy can be produced more efficiently for the whole region.


Green energy firms 



BUY 

STP US | Based in China, Suntech is a leading solar module 

producer with high technology and low cost advantage. 

Meyer Burger Technology 

MBTN SW | Meyer Burger manufactures advanced wire 

sawing machines, which enable raw material savings. 

BUY 

Gamesa Corporacion Tecnologica 

GAM SM | Gamesa is one of the world’s largest 

wind turbine manufacturers with an attractive integrated 

business strategy. 

BUY 

The current solar oversupply favors Asian module manufacturers 

and European equipment suppliers with leading technologies. 

Wind demand is expected to recover on the back of improvement in 

economic indicators and financing conditions. 

The various renewable energy technologies 

benefit from various long-term drivers, including 

government willingness to reduce energy 

dependency and to address the climate 

change issue. For these reasons, many incentives 

and precise targets have been implemented 

to support the development of green 

energies, driving high revenue growth forecasts 

(see chart below). 

Revenues forecasts by sectors (USD bn) 

Global annual revenues projections by sectors in USD bn to USD 340 bn in 2018E, 

implying a 11% CAGR. Source: Clean Edge, Credit Suisse 

As sun irradiation is the major source of 

energy on earth, solar technologies are expected 

to grow strongly on a long-term view. 

However, the solar industry is now in an 

oversupply situation in the wake of the economic 

downturn and change in Spanish legislation. 

In this context, module manufacturers 

are facing intense price competition and 

a strong margin squeeze, providing an advantage 

to Asian companies with an attractive 

cost structure and good brand name, 

such as Suntech Power. European solar 

equipment suppliers also represent an attractive 

investment opportunity as they control 

key IP portfolios. In this specific sector, 

we recommend Meyer Burger, whose particular 

technology enables raw material savings. 

Wind energy is also expected to grow 

strongly because it is one of the most affordable 

green energies. Demand declined 

strongly in the first semester of 2009 due to 

customers’ financing difficulties. Currently, 

while economic indicators are improving and 

stimulus plans are becoming effective, we 

see a good opportunity to invest in Gamesa. 

Effectively, the partnership with one of the 

largest wind developers in the USA, Iberdrola 

Renovables, enables Gamesa to improve 

its order backlog and maintain good 

growth potential. – 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Pierre-Yves Bolinger, Research Analyst 

+41 44 334 00 94, pierre-yves.bolinger@credit-suisse.com



Access to data and applications from anywhere via the Internet 

An increasing number of companies are accessing Web-based applications delivered via the Internet, on demand, from massive data centers. 

The name “cloud computing” comes from the cloud symbol usually used to represent the Internet in flowcharts and network diagrams.


Cloud computing’s future 


Microsoft 

BUY 

MSFT US | Microsoft offers a tremendous customer base, 

a large part of which could be moved online. Key player in 

desktop virtualization. 

Salesforce.com 

HOLD 

CRM US | Salesforce.com’s on-demand customer 

relationship management services attract especially cost 

conscious SMEs. 

Google 

HOLD 

GOOG US | Google benefits from its web-based search 

engine as a platform for supplemented services such as 

Gmail, or advertising. 

Citrix Systems 

BUY 

CTXS US | Citrix, the market leader in application 

infrastructure solutions, benefits from its cooperation with 

Microsoft. 

Intel 

BUY 

INTC US | Market leader for microprocessors (MPU), and 

as such, depends on consumer and corporate IT spending. 

VMware 

BUY 

VMW US | VMware is the market leader in server virtualization, 

and as such, has leverage to corporate IT spending. 

Companies like Google and Salesforce.com are aligned with cloud 

computing through their subscription-based business models. 

The emergence of broadband capacity and the use of low-cost commodity 

hardware and virtualization made cloud computing possible. 

Cloud computing enables further IT outsourcing 

in new and different ways: Software 

as a Service (SaaS) is a mature and 

well-developed market. The most widely 

used cloud marketplace is server and storage 

cloud computing, which is known as Infrastructure 

as a Service (IaaS). Companies 

 

 

 

 

 

 

 

Strong medium-term growth potential 

Spurred by corporate IT spending, worldwide cloud services are becoming a driving force of 

global IT demand. Source: Gartner Research, Credit Suisse 

 

 

 

 

 

 

like Google and Salesforce.com are aligned 

with cloud computing through their subscription-based 

business models, and especially 

the latter has an ideal product offering for 

SMEs. Large internet companies with scale 

which have already heavily invested in data 

center infrastructure (Amazon, Google, Microsoft, 

and Yahoo) should be able to leverage 

their assets to develop additional revenue 

streams. New product offerings will 

range from computing and storage infrastructure 

services to web-based applications. 

The near-term beneficiaries are Amazon 

and Google, which have already 

launched commercial cloud applications and 

platforms. In order to make them work, virtualization 

is a necessity. Microsoft offers a 

comprehensive virtualization system that can 

branch out from within its large base of legacy 

installations. Citrix and VMware are pure 

plays emerging as leaders with product 

roadmaps projecting complete VDI (virtual 

desktop infrastructure) portfolios with different 

strengths; VMware benefits from server 

virtualization in many data centers and Citrix 

benefits from its cooperation with Microsoft. 

Further, companies such as Dell, IBM, 

Hewlett Packard and Intel offer exposure to 

the cloud computing theme as often “old” 

business is replace with “cloud-exposed” 

business. For example, Intel could deliver 

more MPUs for servers instead of desktops. 

– 

 

 

 

 

 

 

 

Ulrich Kaiser, CEFA, Research Analyst 

+41 44 334 56 49, ulrich.kaiser@credit-suisse.com


Investing in nanotechnology 


Johnson Matthey 

BUY 

JMAT LN | Johnson Matthey is one of the leading producers 

of nano-based emission control technologies and 

pharmaceutical materials. 

ASML 

BUY 

ASML NA | ASML is a leading provider of photo-lithographic 

systems used by the semiconductor industry to fabricate 

state-of-the art chips. 

A nanotechnology index tracker on an index, like the 

Credit Suisse Global Nanotechnology Index BUY 

The CS Global Nanotechnology Index comprises 25 stocks 

active in the markets for nanotechnology. 

Rising health costs, energy saving and ecological awareness 

issues are expected to strongly boost the markets for nano-enabled 

products. 

We see environmental and advanced nano-based information 

technology benefiting the most from these issues, owing to potentially 

strong technological gains. 

Nano-enabled innovation is a strong driver 

in the development of nano-enabled products, 

which allow many environmental and 

socio-economic aspects like energy & resource 

saving and health care needs to be 

addressed. Environmental technologies are 

expected to benefit strongly from use of 

 

 

 

 

 

 

 

 

 

 

nanotechnology in addressing rising air and 

water pollution issues. Rising air pollution 

leads to serious health issues like asthma 

and cancer, and ultimately to rising health 

costs estimated to be over EUR 450 bn annually 

in Europe. We expect demand to increase 

for air cleaning filters and catalysts 

Performance of the CS Global Nanotechnology Index 

Since its launch (25/06/2007), the Credit Suisse Global Nanotechnology Index 

has outperformed the MSCI World Index by 19.7% and the NASDAQ Composite Index 

by 8.8% (as of 18/09/2009). Source: Bloomberg, Credit Suisse 

such as Johnson Matthey’s emission control 

technologies, whose enhanced functionalities 

are obtained through the use of platinum-based 

nanoparticles to destroy harmful 

diesel pollutants. 

In the IT sector, the next generation 

of memories like DRAM and FRAM, which 

are non-volatile, fast, energy-efficient and 

possess a high data density, are expected 

to contribute to enhanced functionalities 

and cost reduction for many end-products 

in various sectors ranging from consumer 

electronics, automation systems, robotics, 

health care to supercomputer-based applications. 

For instance, the first 40 nm class 

DRAM-based process technology, developed 

by Samsung Electronics, is expected 

to accelerate the time-to-market cycle by 

50%, increase production volume by 60% 

and energy savings by 30%. In conclusion, 

we recommend investing in a well-diversified 

nanotechnology portfolio like in a nanotechnology 

index tracker, such as the Credit 

Suisse Global Nanotechnology Index, whose 

outperformance versus global benchmarks 

indicates its superior growth potential versus 

the global market (see adjacent chart). – 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Miroslav Durana, Head Index Development 

and Nanotechnology Research 

+41 44 335 10 66, miroslav.durana@credit-suisse.com


Insurance-linked strategies 


BUY a product tracking the Swiss Re Cat Bond Total Return Index in order to gain exposure to the performance and 

diversification potential of Insurance Linked Strategies (ILS). 

Catastrophe bonds and ILS instruments offer attractive risk/return 

prospects and some diversification benefits. 

An increase in insured natural disaster losses 

in the 1990s resulted in growing capital 

needs in the insurance sector to provide 

coverage. In the late 1990s, reinsurance 

companies decided to transfer part of their 

natural disaster risks to capital markets via 

catastrophe bonds and ILS instruments to 

tap new sources of capital. Cat bonds generated 

attractive and weakly correlated returns 

from 2002 to 2009. Their drawbacks 

are liquidity, counterparty and extreme loss 

risks. Given the inevitability of natural disasters, 

and by extension, years with low or 

possibly negative returns, cat bonds and ILS 

investments are by definition a long-term investment. 

The capital destruction caused by 

the credit crisis of 2008 resulted in an increase 

in reinsurance premiums. Sophisticated 

investors ready to accept the specific 

risks of this niche asset class should consider 

an allocation to ILS instruments, given 

their attractive return prospects and diversification 

benefits. – 

Cédric Spahr, CFA, CAIA, Head of Alternative Investment 

Research 

+41 44 333 96 48, cedric.spahr@credit-suisse.com 

CHF bonds in focus 


Philip Morris 

PM (A/A2) 3.25% 03/2013 in CHF | World’s largest tobacco 

company and our preferred name in the industry. 

BUY 

France Telecom 

BUY 

FRTEL (A–/A3) 3.375% 09/2013 in CHF | 27% owned by the 

French state and one of the world’s largest integrated telecom 

operators. 

Royal Bank of Scotland 

RBS (A+/Aa3) 2.25% 10/2012 in CHF | One of the largest 

European banks, with a 70% UK government stake. 

BUY 

CHF bonds set to regain attractiveness. We present a selection of 

investment opportunities for long-term investors. 

With the CHF market likely to regain importance 

as a value-preservation vehicle, Credit 

Suisse Global Fixed Income and Credit Research 

CHF CLASSIC recommendations offer 

attractive investment opportunities. The 

CLASSIC portfolio pools our top picks 

aligned with our duration and credit strategy. 

It contains bonds with a minimum rating of 

BBB–, suitable for investors with a relatively 

conservative risk profile. As we expect government 

yields to trend higher over the next 

6–12 months, we recommend limiting duration 

risk. In CHF, we recommend maturities 

up to 2 years for AAA/AA-rated bonds. For 

lower rated credits, maturities can be slightly 

longer, as we anticipate credit spread tightening 

to compensate for potential rate increases. 

Among credits, we recommend 

bonds from Philip Morris and France Telecom, 

as they both have a strong business 

and financial profile. We also see value in 

bank senior bonds with the recent CHF issue 

of Royal Bank of Scotland offering an 

attractive yield pick-up. – 

Sylvie Golay, CFA, Research Analyst 

+41 44 334 54 37, sylvie.golay@credit-suisse.com


Abbreviations frequently used in reports 

Abb. Description Abb. Description Abb. Description 

CAGR Compound annual growth rate EPS Earnings per share P/B Price-to-book value 

CFO Cash from operations EV Enterprise value P/E Price-earnings ratio 

CFROI Cash flow return on investment FCF Free cash flow PEG P/E ratio divided by growth in EPS 

DCF Discounted cash flow FFO Funds from operations ROE Return on equity 

EBITDA Earnings before interest, taxes, depreciation and amortization IBD Interest-bearing debt ROIC Return on invested capital 

Disclosure appendix 

EMIRATES TELECOM BUY 11/05/09 

(ETISALAT UH) HOLD 19/03/09 

LG DISPLAY 

(034220 KS) 

BUY 17/04/09 

BUY 25/02/09 

Analyst certification 

The analysts identified in this report hereby certify that views about the companies 

and their securities discussed in this report accurately reflect their personal 

views about all of the subject companies and securities. The analysts 

also certify that no part of their compensation was, is, or will be directly or indirectly 

related to the specific recommendation(s) or view(s) in this report. 

FRANCE TELECOM 

(FTE FP) 

HOLD 27/10/08 

BUY 15/07/08 

BUY 08/09/09 

BUY 31/07/09 

HOLD 29/04/09 

BUY 02/04/09 

MEDTRONIC 

(MDT US) 

HOLD 19/01/09 

HOLD 07/11/08 

BUY 26/08/09 

BUY 20/05/09 

BUY 19/05/09 

BUY 20/03/09 

Important disclosures 

Credit Suisse policy is to publish research reports, as it deems appropriate, 

based on developments with the subject company, the sector or the market 

that may have a material impact on the research views or opinions stated herein. 

Credit Suisse policy is only to publish investment research that is impartial, 

independent, clear, fair and not misleading. 

FRESENIUS 

MEDICAL CARE 

(FME GY) 

BUY 30/10/08 

BUY 31/07/08 

BUY 05/08/09 

BUY 04/08/09 

BUY 04/05/09 

BUY 30/04/09 

MEYER BURGER 

TECHNOLOGY AG 

(MBTN SW) 

BUY 18/02/09 

BUY 19/11/08 

BUY 19/08/08 

BUY 03/09/09 

HOLD 24/03/09 

HOLD 08/12/08 

The Credit Suisse Code of Conduct to which all employees are obliged to adhere, 

is accessible via the website at: 

https://www.credit-suisse.com/governance/en/code_of_conduct.html 

BUY 20/02/09 

BUY 19/02/09 

BUY 05/11/08 

BUY 04/11/08 

MICROSOFT 

(MSFT US) 

HOLD 15/09/08 

BUY 27/07/09 

BUY 24/07/09 

BUY 02/07/09 

For more detail, please refer to the information on independence of financial 

research, which can be found at: 

https://www.credit-suisse.com/legal/pb_research/independence_en.pdf 

The analyst(s) responsible for preparing this research report received compensation 

that is based upon various factors including Credit Suisse’s total revenues, 

a portion of which are generated by Credit Suisse Investment Banking 

business. 

BUY 13/08/08 

GAMESA 

BUY 31/07/09 

CORPORACION BUY 15/05/09 

TECNOLOGICA SA BUY 27/02/09 

(GAM SM) 

BUY 12/11/08 

BUY 30/07/08 

GOOGLE (GOOG US) HOLD 17/07/09 

HOLD 17/07/09 

MILLICOM INTL 

CELLULAR SA 

(MICC US) 

BUY 24/04/09 

BUY 22/01/09 

BUY 11/12/08 

BUY 24/10/08 

BUY 22/09/08 

HOLD 28/07/09 

HOLD 21/07/09 

HOLD 16/06/09 

HOLD 18/05/09 

BUY 23/04/09 

Equity rating history as of 28/09/09 

HOLD 12/05/09 

BUY 22/04/09 

Company Rating Date 

(since) 

AMERICA MOVIL BUY 22/07/09 

(AMXL MM) BUY 30/04/09 

CHINA 

CONSTRUCTION 

BANK – H (939 HK) 

BUY 24/08/09 

BUY 24/08/09 

HOLD 27/04/09 

HOLD 01/04/09 

TERMI- 19/02/09 

NATED 

BUY 23/01/09 

BUY 12/01/09 

BUY 13/02/09 

BUY 22/10/08 

BUY 20/10/08 

HOLD 08/09/08 

BUY 13/02/09 

BUY 29/10/08 

HOLD 30/07/08 

CITRIX SYSTEMS 

INC (CTXS US) 

HOLD 08/09/08 

BUY 22/09/09 

BUY 03/12/08 

BUY 17/10/08 

BUY 10/09/08 

MTN GROUP 

LIMITED (MTN SJ) 

BUY 03/09/09 

BUY 25/05/09 

BUY 15/05/09 

ANTA SPORTS 

(2020 HK) 

BUY 18/08/09 

HOLD 27/05/09 

DAIMLER (DAI GY) BUY 25/09/09 

BUY 29/07/09 

INTEL (INTC US) BUY 18/09/09 

BUY 15/09/09 

BUY 08/04/09 

BUY 08/01/09 

HOLD 03/03/09 

BUY 28/04/09 

BUY 15/09/09 

BUY 03/11/08 

HOLD 29/10/08 

HOLD 24/03/09 

BUY 15/07/09 

BUY 04/09/08 

ASML (ASML NA) BUY 10/09/09 

BUY 16/07/09 

HOLD 23/03/09 

HOLD 18/02/09 

BUY 21/04/09 

BUY 15/04/09 

NOVARTIS (NOVN 

VX) 

BUY 17/07/09 

BUY 16/07/09 

BUY 15/07/09 

HOLD 18/02/09 

BUY 16/01/09 

BUY 24/04/09 

BUY 21/04/09 

HOLD 24/10/08 

BUY 07/01/09 

HOLD 23/04/09 

BUY 15/04/09 

HOLD 24/10/08 

BUY 13/11/08 

HOLD 29/01/09 

BUY 17/02/09 

HOLD 25/07/08 

BUY 15/10/08 

HOLD 28/01/09 

HOLD 19/01/09 

HOLD 15/01/09 

HOLD 05/11/08 

HOLD 05/11/08 

HOLD 15/10/08 

EMAAR PROPERTIES BUY 02/06/09 

(EMAAR UH) HOLD 30/01/09 

BUY 22/10/08 

BUY 21/07/08 

JOHNSON 

MATTHEY PUBLIC 

LIMITED COMPANY 

(JMAT LN) 

BUY 20/08/08 

BUY 10/06/09 

HOLD 08/12/08 

HOLD 23/06/08 

HOLD 20/10/08 

HOLD 20/10/08 

HOLD 18/07/08 

BUY 18/07/08


ORASCOM BUY 07/09/09 

TELECOM 

BUY 09/07/09 

HOLDINGS SAE BUY 14/04/09 

(ORTE EY) 

BUY 13/01/09 

BUY 18/11/08 

BUY 04/11/08 

BUY 17/09/08 

PHILIP MORRIS BUY 23/07/09 

INTERNATIONAL BUY 24/04/09 

(PM US) 

BUY 04/02/09 

BUY 22/10/08 

BUY 23/07/08 

ROCHE 

BUY 27/07/09 

(GENUSSSCHEINE) BUY 23/07/09 

(ROG VX) 

BUY 03/06/09 

BUY 22/04/09 

BUY 22/04/09 

BUY 21/04/09 

BUY 16/04/09 

BUY 26/03/09 

BUY 20/03/09 

REST 05/02/09 

BUY 04/02/09 

BUY 30/01/09 

BUY 22/10/08 

BUY 21/10/08 

BUY 25/07/08 

ROYAL BANK OF HOLD 09/04/09 

SCOTLAND HOLD 20/01/09 

(RBS LN) 

HOLD 20/01/09 

HOLD 04/11/08 

HOLD 18/09/08 

SAFT GROUPE S.A. BUY 15/09/09 

(SAFT FP) 

TERMI- 

NATED 

12/01/09 

BUY 10/11/08 

BUY 28/08/08 

SALESFORCE.COM HOLD 22/09/09 

INC (CRM US) 

SUNTECH POWER BUY 24/08/09 

HOLDINGS CO LTD HOLD 25/05/09 

(STP US) 

HOLD 19/02/09 

BUY 03/12/08 

BUY 21/08/08 

SYNTHES 

BUY 29/07/09 

(SYST VX) BUY 29/07/09 

BUY 04/05/09 

BUY 28/04/09 

BUY 18/02/09 

BUY 18/02/09 

BUY 23/10/08 

BUY 23/10/08 

BUY 09/09/08 

TELECOM EGYPT BUY 25/08/09 

(ETEL EY) 

HOLD 08/04/09 

BUY 04/11/08 

BUY 19/09/08 

TEVA (ADR) (TEVA BUY 22/09/09 

US) 

BUY 03/08/09 

BUY 05/05/09 

BUY 20/02/09 

BUY 06/11/08 

BUY 29/07/08 

VMWARE INC -CL A BUY 25/09/09 

(VMW US) 

ZAIN GROUP 

(ZAIN KK) 

BUY 08/06/09 

HOLD 12/03/09 

HOLD 06/11/08 

BUY 11/08/08 

Fundamental and/or long-term research reports are not regularly produced for 

(VMWARE INC -CL A, CITRIX SYSTEMS INC, SALESFORCE.COM INC). 

The Global Research department reserves the right to terminate coverage at 

short notice. Please contact your Relationship Manager for the specific risks of 

investing in securities of these companies. 

As at the end of the preceding month, Credit Suisse beneficially owned 1% or 

more of a class of common equity securities of (ASML, ROCHE (GENUSSS- 

CHEINE), DAIMLER, FRANCE TELECOM, FRESENIUS MEDICAL CARE). 

For the following disclosures, references to Credit Suisse include all of the 

subsidiaries and affiliates of Credit Suisse AG, the Swiss bank, operating under 

its Investment Banking division. 

The subject issuer (AMERICA MOVIL, ZAIN GROUP, GAMESA CORPORA- 

CION TECNOLOGICA SA, ORASCOM TELECOM HOLDINGS SAE, VM- 

WARE INC -CL A, LG DISPLAY, TEVA (ADR), ASML, CITRIX SYSTEMS 

INC, GOOGLE, MEDTRONIC, MICROSOFT, INTEL, PHILIP MORRIS INTER- 

NATIONAL, ROCHE (GENUSSSCHEINE), ROYAL BANK OF SCOTLAND, 

SUNTECH POWER HOLDINGS CO LTD, SYNTHES, CHINA CONSTRUC- 

TION BANK – H, DAIMLER, EMAAR PROPERTIES, EMIRATES TELECOM, 

FRANCE TELECOM, FRESENIUS MEDICAL CARE, JOHNSON MATTHEY 

PUBLIC LIMITED COMPANY, MILLICOM INTL CELLULAR SA, NOVARTIS) 

currently is, or was during the 12-month period preceding the date of distribution 

of this report, a client of Credit Suisse. 

Credit Suisse provided investment banking services to the subject company 

(AMERICA MOVIL, ZAIN GROUP, GAMESA CORPORACION TECNOLOGI- 

CA SA, ORASCOM TELECOM HOLDINGS SAE, VMWARE INC -CL A, LG 

DISPLAY, TEVA (ADR), ASML, CITRIX SYSTEMS INC, GOOGLE, 

MEDTRONIC, MICROSOFT, INTEL, PHILIP MORRIS INTERNATIONAL, 

ROCHE (GENUSSSCHEINE), ROYAL BANK OF SCOTLAND, SUNTECH 

POWER HOLDINGS CO LTD, SYNTHES, CHINA CONSTRUCTION BANK 

– H, DAIMLER, EMAAR PROPERTIES, EMIRATES TELECOM, FRANCE 

TELECOM, FRESENIUS MEDICAL CARE, JOHNSON MATTHEY PUBLIC 

LIMITED COMPANY, MILLICOM INTL CELLULAR SA, NOVARTIS) within 

the past 12 months. 

Credit Suisse provided non-investment banking services, which may include 

Sales and Trading services, to the subject issuer (ORASCOM TELECOM 

HOLDINGS SAE, TEVA (ADR), CITRIX SYSTEMS INC, GOOGLE, MICRO- 

SOFT, INTEL, PHILIP MORRIS INTERNATIONAL, ROCHE (GENUSSSCHE- 

INE), ROYAL BANK OF SCOTLAND, SUNTECH POWER HOLDINGS CO 

LTD, SYNTHES, CHINA CONSTRUCTION BANK – H, DAIMLER, FRANCE 

TELECOM) within the past 12 months. 

Credit Suisse has managed or co-managed a public offering of securities for 

the subject issuer (AMERICA MOVIL, ORASCOM TELECOM HOLDINGS 

SAE, VMWARE INC -CL A, LG DISPLAY, MICROSOFT, INTEL, PHILIP 

MORRIS INTERNATIONAL, ROCHE (GENUSSSCHEINE), ROYAL BANK OF 

SCOTLAND, CHINA CONSTRUCTION BANK – H, DAIMLER, EMIRATES 

TELECOM, FRANCE TELECOM) within the past three years. 

Credit Suisse has managed or co-managed a public offering of securities for 

the subject issuer (ORASCOM TELECOM HOLDINGS SAE, LG DISPLAY, 

MICROSOFT, INTEL, PHILIP MORRIS INTERNATIONAL, ROCHE (GE- 

NUSSSCHEINE), ROYAL BANK OF SCOTLAND, CHINA CONSTRUCTION 

BANK – H, FRANCE TELECOM) within the past 12 months. 

Credit Suisse has received investment banking related compensation from the 

subject issuer (AMERICA MOVIL, ZAIN GROUP, ORASCOM TELECOM 

HOLDINGS SAE, VMWARE INC -CL A, LG DISPLAY, GOOGLE, MICRO- 

SOFT, INTEL, PHILIP MORRIS INTERNATIONAL, ROCHE (GENUSSSCHE- 

INE), ROYAL BANK OF SCOTLAND, CHINA CONSTRUCTION BANK – H, 

DAIMLER, EMAAR PROPERTIES, EMIRATES TELECOM, FRANCE TELE- 

COM, FRESENIUS MEDICAL CARE, JOHNSON MATTHEY PUBLIC LIMIT- 

ED COMPANY, NOVARTIS) within the past 12 months. 

Credit Suisse has received compensation for products and services other than 

investment banking services from the subject issuer (ORASCOM TELECOM 

HOLDINGS SAE, TEVA (ADR), CITRIX SYSTEMS INC, MICROSOFT, INTEL, 

PHILIP MORRIS INTERNATIONAL, ROCHE (GENUSSSCHEINE), ROYAL 

BANK OF SCOTLAND, SUNTECH POWER HOLDINGS CO LTD, SYN- 

THES, CHINA CONSTRUCTION BANK – H, DAIMLER, FRANCE TELECOM) 

within the past 12 months. 

Credit Suisse expects to receive or intends to seek investment banking related 

compensation from the subject issuer (AMERICA MOVIL, ZAIN GROUP, 

TELECOM EGYPT, GAMESA CORPORACION TECNOLOGICA SA, 

ORASCOM TELECOM HOLDINGS SAE, VMWARE INC -CL A, LG DISPLAY, 

TEVA (ADR), ASML, CITRIX SYSTEMS INC, GOOGLE, MEDTRONIC, MI- 

CROSOFT, INTEL, PHILIP MORRIS INTERNATIONAL, ROCHE (GENUSSS- 

CHEINE), ROYAL BANK OF SCOTLAND, SAFT GROUPE S.A., SALES- 

FORCE.COM INC, SUNTECH POWER HOLDINGS CO LTD, SYNTHES, 

CHINA CONSTRUCTION BANK – H, DAIMLER, EMAAR PROPERTIES, 

EMIRATES TELECOM, FRANCE TELECOM, FRESENIUS MEDICAL CARE, 

JOHNSON MATTHEY PUBLIC LIMITED COMPANY, MILLICOM INTL CEL- 

LULAR SA, NOVARTIS) within the next three months. 

As at the date of this report, Credit Suisse acts as a market maker or liquidity 

provider in the securities of the subject issuer (TEVA (ADR), CITRIX SYS- 

TEMS INC, GOOGLE, MICROSOFT, INTEL, MILLICOM INTL CELLULAR 

SA). 

Credit Suisse holds a trading position in the subject issuer (AMERICA MOVIL, 

ZAIN GROUP, TELECOM EGYPT, GAMESA CORPORACION TECNOLOGI- 

CA SA, ORASCOM TELECOM HOLDINGS SAE, VMWARE INC -CL A, LG 

DISPLAY, MTN GROUP LIMITED, TEVA (ADR), ASML, CITRIX SYSTEMS 

INC, GOOGLE, MEDTRONIC, MEYER BURGER TECHNOLOGY AG, MI- 

CROSOFT, INTEL, PHILIP MORRIS INTERNATIONAL, ROCHE (GENUSSS- 

CHEINE), ROYAL BANK OF SCOTLAND, SAFT GROUPE S.A., SALES- 

FORCE.COM INC, SUNTECH POWER HOLDINGS CO LTD, SYNTHES, 

CHINA CONSTRUCTION BANK – H, DAIMLER, EMAAR PROPERTIES, 

EMIRATES TELECOM, FRANCE TELECOM, FRESENIUS MEDICAL CARE, 

JOHNSON MATTHEY PUBLIC LIMITED COMPANY, ANTA SPORTS, MIL- 

LICOM INTL CELLULAR SA, NOVARTIS).


Additional disclosures for the following jurisdictions 

Hong Kong: Other than any interests held by the analyst and/or associates 

as disclosed in this report, Credit Suisse Hong Kong Branch does not hold 

any disclosable interests. United Kingdom: For fixed income disclosure information 

for clients of Credit Suisse (UK) Limited and Credit Suisse Securities 

(Europe) Limited, please call +41 44 333 33 99. 

For further information, including disclosures with respect to any other issuers, 

please refer to the Credit Suisse Global Research Disclosure site at: 

http://www.credit-suisse.com/research/disclaimer 

Guide to analysis 

Equity rating allocation as of 28/09/2009 

Overall 

Investment banking interests 

only 

BUY 41.97% 42.44% 

HOLD 51.84% 51.23% 

SELL 5.79% 5.86% 

RESTRICTED 0.39% 0.46% 

Relative stock performance 

At the stock level, the selection takes into account the relative attractiveness 

of individual shares versus the sector, market position, growth prospects, 

balance-sheet structure and valuation. The sector and country recommendations 

are “overweight,” “neutral”, and “underweight” and are assigned according 

to relative performance against the respective regional and global 

benchmark indices. 

Absolute stock performance 

The stock recommendations are BUY, HOLD and SELL and are dependent 

on the expected absolute performance of the individual stocks, generally on 

a 6–12 months horizon based on the following criteria: 

BUY: 

HOLD: 

SELL: 

RESTRICTED: 

TERMINATED: 

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 types of communications, including e.g. an 

investment recommendation during the course of Credit 

Suisse engagement in an investment banking transaction. 

Research coverage has been concluded. 

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: 

BUY: 

HOLD: 

SELL: 

RESTRICTED: 

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 types of communications, including e.g. an 

investment recommendation during the course of Credit 

Suisse engagement in an investment banking transaction. 

Credit Suisse HOLT 

With respect to the analysis in this report based on the HOLT(tm) methodology, 

Credit Suisse certifies that (1) the views expressed in this report accurately 

reflect the HOLT methodology and (2) no part of the Firm’s compensation 

was, is, or will be directly related to the specific views disclosed in this 

report. The Credit Suisse HOLT methodology does not assign ratings to a 

security. It is an analytical tool that involves use of a set of proprietary quantitative 

algorithms and warranted value calculations, collectively called the 

Credit Suisse HOLT valuation model, that are consistently applied to all the 

companies included in its database. Third-party data (including consensus 

earnings estimates) are systematically translated into a number of default 

variables and incorporated into the algorithms available in the Credit Suisse 

HOLT valuation model. The source financial statement, pricing, and earnings 

data provided by outside data vendors are subject to quality control and may 

also be adjusted to more closely measure the underlying economics of firm 

performance. These adjustments provide consistency when analyzing a single 

company across time, or analyzing multiple companies across industries 

or national borders. The default scenario that is produced by the Credit Suisse 

HOLT valuation model establishes the baseline valuation for a security, 

and a user then may adjust the default variables to produce alternative scenarios, 

any of which could occur. The Credit Suisse HOLT methodology does 

not assign a price target to a security. The default scenario that is produced 

by the Credit Suisse HOLT valuation model establishes a warranted price for 

a security, and as the third-party data are updated, the warranted price may 

also change. The default variables may also be adjusted to produce alternative 

warranted prices, any of which could occur. Additional information about 

the Credit Suisse HOLT methodology is available on request. 

CFROI(r), CFROE, HOLT, HOLTfolio, HOLTSelect, HS60, HS40, Value- 

Search, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or 

registered trademarks of Credit Suisse or its affiliates in the United States 

and other countries. HOLT is a corporate performance and valuation advisory 

service of Credit Suisse. 

For technical research 

Where recommendation tables are mentioned in the report, “Close” is the 

latest closing price quoted on the exchange. “MT” denotes the rating for the 

medium-term trend (3–6 months outlook). “ST” denotes the short-term trend 

(3–6 weeks outlook). The ratings are “+” for a positive outlook (price likely to 

rise), “0” for neutral (no big price changes expected) and “–“ for a negative 

outlook (price likely to fall). Outperform in the column “Rel perf” denotes the 

expected performance of the stocks relative to the benchmark. The “Comment” 

column includes the latest advice from the analyst. In the column “Recom” 

the date is listed when the stock was recommended for purchase 

(opening purchase). “P&L” gives the profit or loss that has accrued since the 

purchase recommendation was given. 

For a short introduction to technical analysis, please refer to Technical Analysis 

Explained at: 

https://www.credit-suisse.com/legal/pb_research/technical_tutorial_ 

en.pdf 

Global disclaimer / important information 

References in this report to Credit Suisse include subsidiaries and affiliates. 

For more information on our structure, please use the following link: 

http://www.credit-suisse.com/who_we_are/en/ 

The information and opinions expressed in this report were produced by the 

Global Research department of the Private Banking division at Credit Suisse 

as of the date of writing and are subject to change without notice. Views 

expressed in respect of a particular stock in this report may be different from, 

or inconsistent with, the observations and views of the Credit Suisse Research 

department of Division Investment Banking due to the differences in 

evaluation criteria. The report is published solely for information purposes 

and does not constitute an offer or an invitation by, or on behalf of, Credit 

Suisse to buy or sell any securities or related financial instruments or to


participate in any particular trading strategy in any jurisdiction. It has been 

prepared without taking account of the objectives, financial situation or needs 

of any particular investor. Although the information has been obtained from 

and is based upon sources that Credit Suisse believes to be reliable, no 

representation is made that the information is accurate or complete. Credit 

Suisse does not accept liability for any loss arising from the use of this report. 

The price and value of investments mentioned and any income that 

might accrue may fluctuate and may rise or fall. Nothing in this report constitutes 

investment, legal, accounting or tax advice, or a representation that any 

investment or strategy is suitable or appropriate to individual circumstances, 

or otherwise constitutes a personal recommendation to any specific investor. 

Any reference to past performance is not necessarily indicative of future results. 

Foreign currency rates of exchange may adversely affect the value, 

price or income of any products mentioned in this document. Alternative investments, 

derivative or structured products are complex instruments, typically 

involve a high degree of risk and are intended for sale only to investors 

who are capable of understanding and assuming all the risks involved. Investments 

in emerging markets are speculative and considerably more volatile 

than investments in established markets. Risks include but are not necessarily 

limited to: political risks; economic risks; credit risks; currency risks; and 

market risks. An investment in the funds described in this document should 

be made only after careful study of the most recent prospectus and other 

fund information and basic legal information contained therein. Prospectuses 

and other fund information may be obtained from the fund management 

companies and/or from their agents. Before entering into any transaction, 

investors should consider the suitability of the transaction to individual circumstances 

and objectives. Credit Suisse recommends that investors independently 

assess, with a professional financial advisor, the specific financial 

risks as well as legal, regulatory, credit, tax and accounting consequences. 

A Credit Suisse company may, to the extent permitted by law, participate or 

invest in other financing transactions with the issuer of the securities referred 

to herein, perform services or solicit business from such issuers, and/or have 

a position or effect transactions in the securities or options thereof. 

Distribution of research reports 

Except as otherwise specified herein, this report is distributed by Credit 

Suisse, a Swiss bank, authorized and regulated by the Swiss Financial Market 

Supervisory Authority. Australia: This report is distributed in Australia by 

Credit Suisse, Sydney Branch (CSSB) (ABN 17 061 700 712 AFSL 226896) 

only to “Wholesale” clients as defined by s761G of the Corporations Act 

2001. CSSB does not guarantee the performance of, nor makes any assurances 

with respect to the performance of any financial product referred 

herein. Bahamas: This report was prepared by Credit Suisse, the Swiss 

bank, and is distributed on behalf of Credit Suisse, Nassau Branch, a branch 

of the Swiss bank, registered as a broker-dealer by the Securities Commission 

of the Bahamas. Bahrain: This report is distributed by Credit Suisse, 

Bahrain Branch, authorized and regulated by the Central Bank of Bahrain 

(CBB) as an Investment Firm Category 2. Dubai: This information is distributed 

by Credit Suisse Dubai branch, duly licensed and regulated by the Dubai 

Financial Services Authority (DFSA). Related financial products or services 

are only available to wholesale customers with liquid assets of over USD 1 

million who have sufficient financial experience and understanding to participate 

in financial markets in a wholesale jurisdiction and satisfy the regulatory 

criteria to be a client. France: This report is distributed by Credit Suisse 

(France), authorized by the Comité des Etablissements de Crédit et des 

Entreprises d’Investissements (CECEI) as an investment service provider. 

Credit Suisse (France) is supervised and regulated by the Commission Bancaire 

and the Autorité des Marchés Financiers. Germany: Credit Suisse 

(Deutschland) AG, authorized and regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht 

(BaFin), disseminates research to its clients that 

has been prepared by one of its affiliates. Gibraltar: This report is distributed 

by Credit Suisse (Gibraltar) Limited. Credit Suisse (Gibraltar) Limited is 

an independent legal entity wholly owned by Credit Suisse and is regulated 

by the Gibraltar Financial Services Commission. Guernsey: This report is 

distributed by Credit Suisse (Guernsey) Limited. Credit Suisse (Guernsey) 

Limited is an independent legal entity wholly owned by Credit Suisse and is 

regulated by the Guernsey Financial Services Commission. Copies of annual 

accounts are available on request. Hong Kong: This report is issued in Hong 

Kong by Credit Suisse Hong Kong branch, an Authorized Institution regulated 

by the Hong Kong Monetary Authority and a Registered Institution regulated 

by the Securities and Futures Ordinance (Chapter 571 of the Laws of 

Hong Kong). India: This report is distributed by Credit Suisse Securities 

(India) Private Limited (“Credit Suisse India”), regulated by the Securities and 

Exchange Board of India (SEBI). Italy: This report is distributed in Italy by 

Credit Suisse (Italy) S.p.A., a bank incorporated and registered under Italian 

law subject to the supervision and control of Banca d’Italia and CONSOB. 

Luxembourg: This report is distributed by Credit Suisse (Luxembourg) S.A., 

a Luxembourg bank, authorized and regulated by the Commission de Surveillance 

du Secteur Financier (CSSF). Mexico: The information contained 

herein does not constitute a public offer of securities as defined in the Mexican 

Securities Law. This report will not be advertised in any mass media in 

Mexico. This report does not contain any advertisement regarding intermediation 

or providing of banking or investment advisory services in Mexico or 

to Mexican citizens. Qatar: This information has been distributed by Credit 

Suisse Financial Services (Qatar) L.L.C, which has been authorized and is 

regulated by the Qatar Financial Centre Regulatory Authority (QFCRA) under 

QFC No. 00005. All related financial products or services will only be available 

to Business Customers or Market Counterparties (as defined by the 

Qatar Financial Centre Regulatory Authority (QFCRA)), including individuals, 

who have opted to be classified as a Business Customer, with liquid assets 

in excess of USD 1 million, and who have sufficient financial knowledge, 

experience and understanding to participate in such products and/or services. 

Russia: The research contained in this report does not constitute any 

sort of advertisement or promotion for specific securities, or related financial 

instruments. This research report does not represent a valuation in the meaning 

of the Federal Law On Valuation Activities in the Russian Federation and 

is produced using Credit Suisse valuation models and methodology. Singapore: 

Distributed by Credit Suisse Singapore branch, regulated by the Monetary 

Authority of Singapore. Spain: This report is distributed in Spain by 

Credit Suisse Spain branch, authorized under number 1460 in the Register 

by the Banco de España. United Kingdom: This report is issued by Credit 

Suisse (UK) Limited and Credit Suisse Securities (Europe) Limited. Credit 

Suisse Securities (Europe) Limited and Credit Suisse (UK) Limited, both authorized 

and regulated by the Financial Services Authority, are associated but 

independent legal entities within Credit Suisse. The protections made available 

by the Financial Services Authority for retail clients do not apply to investments 

or services provided by a person outside the UK, nor will the Financial 

Services Compensation Scheme be available if the issuer of the 

investment fails to meet its obligations. 

UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOF 

MAY BE SENT, TAKEN INTO OR DISTRIBUTED IN THE UNITED STATES 

OR TO ANY US PERSON. 

JAPAN: NEITHER THIS REPORT NOR ANY COPY THEREOF MAY BE 

SENT, TAKEN INTO OR DISTRIBUTED IN JAPAN. 

Local law or regulation may restrict the distribution of research reports into 

certain jurisdictions. 

This report may not be reproduced either in whole or in part, without the written 

permission of Credit Suisse. Copyright © 2009 Credit Suisse Group AG 

and/or its affiliates. All rights reserved. 

9C015A 

Imprint: Publisher Credit Suisse, Global Research, P.O. Box 300, CH-8070 Zurich Director Giles Keating Editorial deadline 28 September 2009 Organization Manuel Moser, 

Katharina Schlatter Concept and design www.arnold.inhaltundform.com Layout and typesetting Rolf Ernst Printer Druckerei Feldegg AG, Zollikerberg Copy editing Ross Hewitt, 

Francis Piotrowski Cover photos Mathias Hofstetter, istockphoto.com, Corbis

www.credit-suisse.com/research

Global Megatrends

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?