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Global Investor 2.13, November 2013 Expert know-how for Credit Suisse investment clients New Mobility Easing
Global Investor 2.13, November 2013 Expert know-how for Credit Suisse investment clients New Mobility Easing

Global Investor 2.13, November 2013 Expert know-how for Credit Suisse investment clients

New Mobility

Easing global gridlock

Important disclosures are found in the Disclosure appendix. Credit Suisse does and seeks to do business with companies covered in its research that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For a discussion of the risks of investing in the securities mentioned in this report, please refer to the following Internet link:

https://research.credit-suisse.com/riskdisclosure

link: https://research.credit-suisse.com/riskdisclosure Fold out the handle, and check in with Global Investor! The

Fold out the handle, and check in with Global Investor! The briefcase handles are perforated, so just punch them out and flip them up to form the handle. You’ve now got a little briefcase of sorts, and you’re good to go, as Global Investor explores the New Mobility. Be it just up the street, across the continent, or around the world, we’re moving in new directions.

Martina Lubyová Labor migration entails costs as Ian Goldin well as benefits. An expert weighs
Martina Lubyová
Labor migration entails costs as
Ian Goldin
well as benefits.
An expert weighs in
migration debate.
on the modern
Pedro Conceição
Economies and
education have improved, but
still
a paradox
that exists.
in Africa there’s
is stretched to
Dario Hidalgo
Mass transit
the limit,
rethink.
and in serious
need of a sustainability

GLOBAL INVESTOR 2.13

Editorial 03

Photos: Chou Chiang | Martin Stollenwerk

— 03 Photos: Chou Chiang | Martin Stollenwerk Responsible for coordinating the focus themes in this

Responsible for coordinating the focus themes in this issue:

Nilanjan Das, CFA, is Research Editor of Global Investor and Head of Global Research KPO. He leads a cross- asset research team covering global equities, bonds, currencies, economic and thematic research. He joined Credit Suisse in 2009, bringing 15 years of research and banking experience, including positions at J. P. Morgan Global Research and ICICI Bank. He is a postgraduate from the Indian Institute of Management, Bangalore. Sara Carnazzi Weber joined Credit Suisse in 1999 and is currently a senior economist responsible for long-term macroeconomic issues. She has ten years of experience in regional and spatial economics and contributed significantly to the development of the regional analysis unit within Research. She holds a doctorate from the University of Fribourg.

She holds a doctorate from the University of Fribourg. At certain moments in history, a cluster
She holds a doctorate from the University of Fribourg. At certain moments in history, a cluster

At certain moments in history, a cluster of innovations reaches a point of maturity and comes together to create radical change. Steam power, railways and the assembly line came together in the mid-19 th century’s wave of industrial globalization. After World War II, efficient air-conditioning, electricity grids and cold-chain logistics triggered a US productivity boom as factory conditions improved, and allowed rapid development of the US Sun Belt and then Asian hubs such as Singapore and Hong Kong. Typically, these clusters occur when new technologies combine with relatively old ones to create something radically new that is greater than the sum of the parts. Today, we see three such clusters, all related to mobility. First, low-cost Internet-based communications like Skype and cheaper money transfers combine with the existing technology of long-haul air travel to transform the concept of immigration from the old model of lifelong change requiring permanent separation from friends and family, into a temporary, intermittent activity in which close contact is maintained with home. Second, the application of modern information- based control systems to relatively old automotive and bicycle technol- ogies presages a revolution in urban and eventually interurban trans- port. And a third is waiting in the wings: the explosion of Internet-based learning can help social mobility, for which education is key. In this issue, we examine how this New Mobility is set to transform economies, lives and social interactions around the world. These ef- fects may prove vital in emerging countries, where trend economic growth seems to have slowed. Lack of infrastructure, income uncer- tainty and in some cases labor bottlenecks are all possible causes. The New Mobility offers some potential solutions, reducing the scale of physical infrastructure investment needed to relieve urban gridlock, supporting consumption by opening new income streams from migrant workers, and upping temporary labor supply in countries facing short- ages. Those countries that embrace these solutions will benefit from a new potential way to reinvigorate growth.

Giles Keating, Head of Research and Deputy Global CIO

GLOBAL INVESTOR 2.13 Contents — 04 TECHNOLOGY ENABLERS MODERN FUTURE OF MIGRATION MOBILITY
GLOBAL INVESTOR 2.13
Contents — 04
TECHNOLOGY
ENABLERS
MODERN
FUTURE OF
MIGRATION
MOBILITY

SOCIAL/POLITICAL

DRIVERS

If there’s one constant when it comes to human nature and activity, it’s the fact that we’re perpetually on the move whether it’s the search for safety and security as millions flee war-torn regions of the world, the hope for a brighter economic future elsewhere, simply trying to make sure we get through the morning commute without being delayed, or making a concerted effort to climb the rungs toward a higher standing within the social order.

> Pages 08, 18, 30, 44

a concerted effort to climb the rungs toward a higher standing within the social order. >
a concerted effort to climb the rungs toward a higher standing within the social order. >
a concerted effort to climb the rungs toward a higher standing within the social order. >
a concerted effort to climb the rungs toward a higher standing within the social order. >

GLOBAL INVESTOR 2.13

Contents 05

New Mobility

06

The New Mobility Information technologies are reconfiguring the way we travel, work and communicate. Giles Keating explores how the New

Mobility will impact economic growth.

10

Migration: Good or bad? Is international migration posing a problem, or rather a solution? Ian Goldin separates fact from fiction, providing a deeper

understanding of a complex topic.

14

Top shots on the move Global Investor presents a collection of portraits featuring ten top shots from around the world. Find out where they are from, and where they are deployed. Each is unique, but what is it that they all have in common?

20

Keeping cities moving According to Dario Hidalgo, as cities continue to expand,

the need for effective mass rapid transit becomes all the more important. He explains why more roads aren’t the answer.

24

So far, yet so near With over a billion smartphone users, mobile technologies are already transformative. But, says Uwe Neumann, the real boom

comes once people, processes, things and data are all linked.

26

Innovation welcome in a USD 40 billion business Remittances from migrants to their home countries have a major economic impact. Christine Schmid and Javier Lodeiro

explain why and look at the role that mobile communication technology plays in getting money to those who need it most.

32

Moving ahead in Africa Where 40% of primary school students drop out, there’s a need for more accessible education in Africa. But as Pedro Conceição reports, learning and earnings

aren’t always directly linked.

36

(Un)equal opportunity Earnings mobility is something that citizens of all the rich countries value. Miles Corak examines the roles that socio-

economic background and education play in that regard.

38

Managing migration National migration policies are a complex matrix where demo- graphics and economics intersect. Martina Lubyová explores

the topic of managing labor mobility in a globalized world.

46

New mobility models needed Urban streets are chronically congested, slowing commuters and goods while choking residents with pollution. Andrea Schnell and Thomas Rühl present some new solutions

to what has become a long-standing problem.

50

How ideas spread If there’s something worth sharing, Duncan Watts wants to

know about it. He’s made a career of studying how and why it is that some ideas get passed up, passed along or “go viral.”

52

The China travel surge Tourism from China is booming – to such a degree that China plans to build 70 new airports by 2015. Scott Booker

reports on the travel explosion that was worth USD 102 billion last year.

Disclaimer > Page 56

that was worth USD 102 billion last year. Disclaimer > Page 56 Podcast on www.credit-suisse.com/globalinvestor

Podcast on www.credit-suisse.com/globalinvestor

Introduction MOBILE LIVES
Introduction
MOBILE LIVES

The New Mobility

The information revolution is opening up new ways to leverage the “old” economy. New control systems ease traffic on congested highways, teaching expands beyond the classroom, family ties are no longer broken by distance. Does this offer hope for improving the disappointing growth rates now affecting both developed and emerging countries?

TEXT Giles Keating, Head of Research and Deputy Global CIO, Credit Suisse

The digital technologies are starting to transform mobil- ity, affecting people, traffic and ideas. First, new cheap ways to transfer small sums of money across borders and almost free international communication (Skype, Face-

) are now combining with low-cost long-haul air

travel to change mass migration from the traditional model of lifelong upheaval to a new era in which mass migration can be temporary, and close contact with home is retained. Second, the application of modern informa- tion-based control systems to the old technologies of automobiles, bicycles and public transport promises a revolution in urban and eventually interurban transport, squeezing far more passenger journeys from existing over- stretched infrastructure. Third, Internet-based learning, still in its infancy but growing rapidly, has the potential to reach vast numbers of people, greatly magnifying the social mobility that education brings. Taken together, we call these three phenomena “The New Mobility.” The changing shape of migration is difficult to measure directly, but some telltale indicators give an idea of what is happening. In the Philippines, one-tenth of national income is now earned abroad and sent home to help sup- port children and other family members. Much of this money seems to come from people who have traveled

book

abroad to work temporarily rather than permanently, in places such as Hong Kong, Singapore and the Gulf. Javier Lodeiro and Christine Schmid analyze the growth of these money flows on page 26. Large numbers of people also travel from the former Soviet Republics to get temporary work in Russia. As an example, in Tajikistan this brings in income worth almost half of domestic output, the world’s highest figure. Mar- tina Lubyová (page 38) provides color on both the benefits and problems faced by Russia as it receives these large numbers of temporary workers. Gulf states Dubai and Qatar rely heavily on temporary workers from the sub- continent to fuel all levels of their economy from construc- tion and domestic service to fund management, while, within Europe, London is a clear temporary migration hot spot.

Modern telecommunications ease pain of leaving home

Physical separation from family and friends will always be an issue, but modern telecommunications mitigate its effects substantially. Long-distance international phone

calls now cost pennies – barely two decades ago, they were an almost unaffordable luxury for people on low incomes.

 

And seeing people at a distance,

largely the preserve of

expensive corporate videoconferences ten years ago, is now available via Internet street cafés across emerging countries using Skype, while low-end cell phones help spread messaging systems like WhatsApp (which send text, photos and audio clips) toward the lower end of the income scale. Arguably, the impact of these changes in boosting temporary migration is only just beginning.

“Physical separation

from family and friends will

always be

an issue, but

modern telecommunications mitigate its effects substantially.”

Going abroad to work for a while can bring substantial economic benefits. For example, in the Philippines, in- come from abroad has risen consistently for 15 years, pro- viding support even when the domestic economy was slow- ing down. Of course, there are adverse effects as well, and both good and bad effects have been widely analyzed for traditional (permanent) migration, as described by Profes- sor Ian Goldin in his excellent article on page 10. The newer phenomenon of temporary mass migration is clear- ly more flexible and so should be able to offer a better balance of good effects compared to bad. We believe that it will grow in scale, as the cost of sending money home falls further, cheap airfares proliferate, and services like Skype become even more widely used.

A need for multimodal transit and smarter planning

Darío Hidalgo on page 20) can help, but a broader solution is to use information technology to increase the passen- ger-carrying capacity of a given road system. This has the potential to be far cheaper and less disruptive than mas- sive physical construction programs. Education is often seen as key to social mobility, but this does not apply everywhere. Miles Corak (page 36) shows that poor education often persists across gen- erations in developed countries, while Pedro Conceição (page 32) shows that in sub-Saharan Africa, education does not necessarily mean getting a job. Could the New Mobil- ity help? It could allow adults to use Internet learning to catch up on skills they missed at school, and it could help educated young Africans to find worthwhile work abroad for a while, without having to leave home permanently. Already, Internet-based learning is growing rapidly. Lec- tures by professors from top universities are now available to a worldwide audience and online courses like those offered by Rosetta Stone provide an intuitive and yet rigor- ous way to learn new languages. Even social networks play a role, complementing formal education by spreading key ideas, as analyzed by Duncan Watts (page 50). Economic growth has slowed recently in many emerg- ing countries and their stock markets have seen periods of major underperformance. The New Mobility may help offer solutions. It can bring relief to the urban gridlock that is inhibiting development; it can help to boost con- sumption by opening new income streams from local people who are temporarily working abroad, while boost- ing labor supply in other places where it is needed; and it may also be able to help relieve educational bottlenecks. All this can be helpful for growth in developed countries as well. Crucially, it is not just that the technologies are there to do this; it is also that the economic incentives to apply those technologies are rising.

Urban transport is starting to be reshaped by information technology. Automated bicycle rental is now commonplace in many cities around the world (see just one example on page 23). Remote-controlled lanes for cars and other ve- hicles are set to move from the lab to public roads within the next few years; smartphone apps already allow pas- sengers to see when their bus is arriving and to identify the nearest taxi. And in future, the boundary between buses and taxis may become blurred, with a unified ve- hicle fleet able to switch between shared and exclusive use, and between fixed and variable routes, depending on de- mand. Andrea Schnell and Thomas Rühl review these de- velopments (page 46) while Eric Höweler (page 49) dis- cusses their application to interurban travel. With traffic in cities such as Jakarta, Beijing, Mumbai and Manila clearly a major constraint on economic growth and high- ly pollutive, and mass transit systems expensive and dis- ruptive to build, a new approach is badly needed. Cost- effective solutions such as bus-ways (see the interview with

solutions such as bus-ways (see the interview with Giles Keating is Global Head of Research and

Giles Keating is Global Head of Research and Deputy Global CIO for Credit Suisse. His team conducts the fundamental research key to the investment process for Credit Suisse clients. As Deputy CIO he plays a core role in those investment decisions. He joined Credit Suisse over 25 years ago and has degrees from the London School of Economics and Oxford, where he is an Honorary Fellow. He is chair of Tech4All and techfortrade, charities aiming to reduce poverty via use of technology.

is an Honorary Fellow. He is chair of Tech4All and techfortrade, charities aiming to reduce poverty
is an Honorary Fellow. He is chair of Tech4All and techfortrade, charities aiming to reduce poverty
3,000,000 13,000,000 people 2,000,000 Chapter I 1,000,000 MODERN 500,000 MIGRATION The arrow’s width shows the
3,000,000
13,000,000
people
2,000,000
Chapter I
1,000,000
MODERN
500,000
MIGRATION
The arrow’s width shows the
number of people who have migrated
from one country to another
INTERNATIONAL
MIGRATION FLOWS
Immigration remains a hot political topic, though only 231 million
people, representing 3.2% of the world’s total population,
are living outside their country of origin. In absolute terms,
however, their figure has increased by 50% since 1990.
In 2013, 231 million people worldwide
had left their country of origin
and emigrated, with the USA being
their preferred destination. The
USA is home to nearly a fifth of the
world’s international migrant stock.
Source: UN DESA
Migration: Good or bad?
page 10
The Silicon Valley advantage
CANADA
page 13
50
5
10
TORONTO
NEW YORK
USA
SAN FRANCISCO
WASHINGTON DC
Immigrants
in millions, 2013
CHICAGO
LOS ANGELES
DALLAS
TOP 10 IMMIGRATION
COUNTRIES OF THE WORLD
HOUSTON
MIAMI
MEXICO
USA 45,785,090
RUSSIAN FEDERATION 11,048,064
GERMANY 9,845,244
SAUDI ARABIA 9,060,433
UNITED ARAB EMIRATES 7,826,981
UNITED KINGDOM 7,824,131
FRANCE 7,439,086
CANADA 7,284,069
AUSTRALIA 6,468,640
SPAIN 6,466,605
CHICAGO
Cities with 1 million or more
foreign-born residents
HOT SPOT MIGRANT
CITIES OF THE WORLD
The points on the map are the cities
USA
attracting one in five of the world’s
Population: 320,051,000
15
immigrants. Combined, these
metropolitan areas have 37 million
Immigrants: 45,785,090
14.3% of population
5
foreign-born residents.
Migrant native countries
MEXICO
12,950,828
CHINA
2,246,840
Emigrants
in millions, 2013
INDIA
2,060,771
PHILIPPINES
1,998,932
PUERTO RICO
1,685,015
VIETNAM
1,381,076
TOP 10 EMIGRATION
COUNTRIES OF THE WORLD
EL SALVADOR
1,371,767
CUBA
1,201,164

INDIA 14,179,627 MEXICO 13,201,181 RUSSIAN FEDERATION 10,820,372 CHINA 9,333,211 BANGLADESH 7,725,622 PAKISTAN 5,617,297 UKRAINE 5,552,689 PHILIPPINES 5,491,607 AFGHANISTAN 5,102,409 UNITED KINGDOM 5,005,941

Source: UN DESA

CHICAGO USA DALLAS USA DUBAI United Arab Emirates HONG KONG China HOUSTON USA JIDDAH Saudi Arabia LONDON United Kingdom LOS ANGELES USA MELBOURNE Australia MIAMI USA MOSCOW Russia NEW YORK USA PARIS France RIYADH Saudi Arabia SAN FRANCISCO USA SINGAPORE Singapore SYDNEY Australia TORONTO Canada WASHINGTON DC USA

Source: MPI

Saudi Arabia SAN FRANCISCO USA SINGAPORE Singapore SYDNEY Australia TORONTO Canada WASHINGTON DC USA Source: MPI
UNITED KINGDOM GERMANY Population: 63,136,000 MIGRATION IS ON THE RISE Immigrants: 7,824,131 12.4% of population
UNITED KINGDOM
GERMANY
Population: 63,136,000
MIGRATION IS ON THE RISE
Immigrants: 7,824,131
12.4%
of population
Population: 82,727,000
Immigrants: 9,845,244
11.9% of population
Migrant native countries
Migrant native countries
INDIA
769,540
TURKEY
1,543,787
POLAND
687,444
POLAND
1,146,754
PAKISTAN
405,878
RUSSIAN FED.
1,007,536
The stock of international migrants has increased by 50% since 1990. The number
of migrants rose by 77 million between 1990 and 2013, from 154 million to
more than 231 million, with Southeast Asians and Southern Africans most likely
to leave their home country.
IRELAND
360,263
KAZAKHSTAN
717,753
CHINA
330,659
ITALY
433,127
GERMANY
315,024
ROMANIA
383,626
SOUTH AFRICA
258,990
GREECE
238,220
International migrant stock as a percentage of the total population
BANGLADESH
207,915
CROATIA
233,064
SINGAPORE
SWITZERLAND
NEW ZEALAND
USA
ITALY
43
40
%
29
30
%
25
LONDON
MOSCOW
20
%
14
PARIS
9
10
%
0%
1990 2000
2010
2013
Source: UN DESA
RUSSIAN FEDERATION
UNITED
KINGDOM
POLAND
GERMANY
UKRAINE
KAZAKHSTAN
SWITZERLAND
FRANCE
SPAIN
TURKEY
CHINA
AFGHANISTAN
JORDAN
PAKISTAN
UAE
BANGLADESH
SAUDI
HONG KONG
ARABIA
INDIA
PHILIPPINES
SINGAPORE
SAUDI ARABIA
DUBAI
Population: 28,829,000
Immigrants: 9,060,433
31.4% of population
AUSTRALIA
RIYADH
Migrant native countries
SYDNEY
INDIA
1,761,857
JIDDAH
PAKISTAN
1,319,607
MELBOURNE
BANGLADESH
1,309,004
EGYPT
1,298,388
PHILIPPINES
1,028,802
NEW ZEALAND
YEMEN
461,042
INDONESIA
379,632
SUDAN
234,564
> 20%
10–20%
1–10%
< 1%
International migrant stock as a
percentage of the total population
INTERNATIONAL
AUSTRALIA
MIGRANT STOCK
More than a fifth of the population
in Australia, Saudi Arabia, the United
Arab Emirates, Kuwait, Kazakhstan
and Switzerland are non-nationals.
Population: 23,343,000
Immigrants: 6,468,640
27.7% of population
Migrant native countries
UNITED KINGDOM
1,277,474
NEW ZEALAND
582,761
CHINA
447,407
INDIA
364,764
ITALY
231,650
VIETNAM
225,749
Source: UN DESA
PHILIPPINES
189,969
SOUTH AFRICA
166,731

GLOBAL INVESTOR 2.13

10

GLOBAL INVESTOR 2.13 — 10 MOBILE POPULATIONS MIGRATION GOOD OR BAD? Throughout history, migration has always

MOBILE POPULATIONS

GLOBAL INVESTOR 2.13 — 10 MOBILE POPULATIONS MIGRATION GOOD OR BAD? Throughout history, migration has always

MIGRATION GOOD OR BAD?

Throughout history, migration has always been the most important driver of human progress and dynamism. Indeed, economic evidence indicates that migration helps economies, both in the developed and developing world. Yet arguments around migration are often driven by fear rather than facts. Ian Goldin brings a nuanced view to a complex topic.

TEXT Ian Goldin, director, Oxford Martin School, University of Oxford

GLOBAL INVESTOR 2.13

11

We live in an era of two competing narratives. The first suggests that migrants are flooding across our borders, and that they are stealing jobs and eroding our country’s social fabric in the process. Alterna- tively, the second argues that in spite of minor short-term dislocations, international migration is a boon: it generates innovation and dynamism while fueling long-term economic growth. My view is that both of these caricatures are too simplistic. The costs of migration are felt in the short term and are local, so they have real social and political consequences, while the benefits are more diffuse and longer term. As with debates on trade, where protectionist instincts tend to over- whelm the longer-term need for more open societies, the core role that migrants play in economic development is often overwhelmed by defensive measures to keep migrants out. The economic evidence is clear: migration helps economies, both in the developed and develop- ing world. As is the case with trade and in the realm of the free flow of ideas, shutting ourselves off from each other is harmful.

More people, more borders

Globally, the estimated 231 million migrants in the world make up about 3% of the world’s population. Before passports became wide- ly adopted about 100 years ago, and particularly in the age of mass migration of the 19 th century, up to one-third of parts of Europe emigrated and over a quarter of the population of the USA were im- migrants. While the share of our societies that are migrants may well be lower today than in previous centuries, the number of migrants has certainly grown. In part, this reflects the fourfold increase in the number of independent countries over the past 100 years. This proliferation means that people who previously moved within a coun- try – such as the Soviet Union – are now recorded as migrants. But not only has the number of countries quadrupled over the past cen- tury, so too has the number of people to more than seven billion people. More borders and more people result in more migrants, even if their relative contribution to our populations or economies declines. At the end of 2012, three out of four migrants live in a small group of 24 countries, with the USA being the most significant home for migrants. Approximately 70 million migrants have migrated from one developing country to another, and approximately 65 million have gone from developing to richer countries, with about 55 million migrants having moved between the different OECD countries, and a rapidly growing number – currently around 20 million – having left the OECD for emerging markets, where job opportunities are multiplying most rapidly. The European Union is the world’s largest experiment with visa-free labor migration. Even though emigration from compara- tively less rich countries such as Romania and Poland was substantial, Germany, Italy and the UK were both leading sources and leading recipients of migration. The main lesson from Europe is how few people migrate, with migration levels seldom much higher than those in the periods when greater restrictions applied. Given the levels of youth unemployment of over 50% in Greece and Spain, it is remark- able that so few young people have migrated. This highlights how the arguments around migration are often driven by fear rather than facts. Opportunities regarding employment as well as housing and other key determinants of demand are at least as important as the supply-side push factors that contribute to migration.

Why do they go?

It is dangerous to generalize about migration. Of the annual flow of around 15 million migrants, most fit into one of four categories of

million migrants, most fit into one of four categories of Ian Goldin is Professor and Director

Ian Goldin is Professor and Director of the Oxford Martin School and Professor of Globalization and Development at the University of Oxford. This article draws on his widely acclaimed book “Exceptional People: How Migration by Princeton University Press in 2012.

cross-border movement: economic, student, social and refugee/asy- lum. There are around 5 million economic migrants each year. High- skill migrants bring special talents or training across borders to fill gaps in the native workforce. Low-skill migrants tend to fill short- ages in physical labor or jobs that are less desired by the native labor force. About 3.5 million students migrate each year. While some countries, such as the UK, insist that students leave, others such as Australia and the USA have gained talent by allowing certain students to stay. For example, 68% of foreign students who received doctor- ates in the USA in 2000 were still there five years after graduation. Social and family reasons account for about 2 million migrants a year, as individuals and families aim to be reunited with loved ones. This is most common in the nations built largely by more recent generations of immigrants (the USA, Canada and Australia) as well as the former colonial empires (especially the United Kingdom and France). Conflict and persecution push people from their homes and across borders. Refugee and asylum seekers account for an average of about two million migrants per year. At the end of 2012 there were 15.4 million officially recognized refugees worldwide, with 80% of these refugees hosted by developing countries, up from 70% ten years ago. It is impossible to know how many undocumented migrants there are in the world, but in the USA the estimates are that there are about 11 million out of a total number of around 50 million migrants, or about 22% of the total. By the mid-1990s, more than 30% of documented migrants into the USA were highly skilled. Similar trends exist in Europe. Germany launched a “green card” program in 2000 to entice workers to fill gaps in labor, particularly in healthcare and information technology. Concur- rently, France worked to attract scholars, scientists and computer professionals. As a result, the percentage of skilled migrants into EU countries climbed from 15% in the early 1990s to 36% in the >

GLOBAL INVESTOR 2.13

12

original 14 EU countries by 2011. This increase in high-skill labor movement reflects the priorities of business. Firms recognize that they are engaged in a war for talent with their competitors. Govern- beneficial arrangement. Firms are more agile, adaptive and profitable. Governments receive more revenue and thrive off the dynamism that high-skilled migrants bring. Yet it is not only higher-skilled migrants that are vital. In the USA, unskilled migrants are an essential part of the construction and services sector. In the Middle East, the success of Dubai or other emirates and Qatar rests on over 90% of the labor force being skilled and unskilled migrants.

Debunking migration myths

If migrants play such a vital role, why is there so much concern? The first myth is that migrants take jobs and destroy economies. The truth is the opposite: migration makes economies more dynamic, creates jobs and sparks long-term growth. In the USA, migrants have been founders of companies such as Google, Intel, PayPal, eBay and Yahoo. In fact, skilled migrants account for over half the Silicon Valley start-ups and over half of patents, even though they are around 15% of the population. There have been three times as many immigrant Nobel laureates, National Academy of Science members and Acad- emy Award film directors than native ones. Such anecdotal results are echoed systematically on a large scale. Research at the Federal Reserve Bank of San Francisco recently concluded that “immigrants

Historical overview of migration flows

The infographic below depicts a number of migratory trends throughout the 20th century. Both the source and target destination are shown. The reasons are varied, but economic, conflict and social migration were the primary drivers of these migratory trends. Source: BBC

“The European Union is the world’s largest experiment with visa-free labor migration.”

expand the economy’s productive capacity by stimulating investment and promoting specialization… This produces efficiency gains and boosts income per worker.” Research on the net fiscal impact of the immigration of Polish, Czech and other migrants to the UK from the ten countries that joined the European Union in 2004 showed that the migrants contributed “significantly” more in taxes than they received in benefits and services. On a global scale, according to the World Bank, increasing migration equal to 3% of the workforce in developed countries between 2005 and 2025 would generate worldwide eco- nomic gains of USD 356 billion. Some economists predict that if borders were completely open and workers were allowed to go where they pleased, it would produce gains as high as USD 39 trillion for

>

continued on page 16

1918 –1919 Eastern Europe to USA and Canada 1918 Britain to Australia, South Africa and
1918
–1919
Eastern Europe to
USA and Canada
1918
Britain to Australia,
South Africa and
New Zealand
1939–1940
Russia to Siberia
1950
Mexico and
1940
Central America
European Jews
to USA
to USA
1950–1960
1945
North Africa
to France,
Spain and Italy
1973
Turkey to Germany
Ugandan Asians to UK
1947
1975
India, Pakistan and
Sri Lanka to UK
1950 –1960
West Indies to UK
Vietnam to Malaysia,
Australia and USA

NY Metro

S. California

United Kingdom

New England

NY Metro S. California United Kingdom New England 52% — 13 GLOBAL INVESTOR 2.13 MICROECONOMIES The

52%

13

GLOBAL INVESTOR 2.13

Kingdom New England 52% — 13 GLOBAL INVESTOR 2.13 MICROECONOMIES The Silicon Valley advantage TEXT Vivek

MICROECONOMIES

England 52% — 13 GLOBAL INVESTOR 2.13 MICROECONOMIES The Silicon Valley advantage TEXT Vivek Wadhwa, VP

The Silicon Valley advantage

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

Silicon Valley

Singularity University, Mountain View, CA Silicon Valley Venture capital amount raised in 2012 . Top five
Singularity University, Mountain View, CA Silicon Valley Venture capital amount raised in 2012 . Top five
Singularity University, Mountain View, CA Silicon Valley Venture capital amount raised in 2012 . Top five

Venture capital amount raised in 2012. Top five regions make up 53% of global VC funding of USD 42 bn.

Source: Ernst &Young

96% 74% 52% 40% 5.5% 1.6%

9 6 % 74% 52% 40% 5.5% 1.6% Vivek Wadhwa holds research positions at Singularity

Vivek Wadhwa holds research positions at Singularity University and Duke University, among others, and is the author of “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent.”

At first glance, the individuals below appear to have nothing in common other than their impressive titles. Take a closer look. All of them are well or extremely well qualified and seven out of ten have a multinational and/or a multilingual background. With organizations becoming ever more global, managers with strong educations and cross-cultural networks

GO?

THEY DO

Place of workare

WHERE

Place of birth

Photos: Bain & Co, Deutsche Bank, Newscast, Nokia, Stéphane de Bourgies, PepsiCo, Nestlé, ABB, Anheuser-Busch InBev ®, Coca-Cola

MOVE DO

WHERE

more mobile and in greater demand than ever.

ON THE

SHOTS FROM?

TOP COME

THEY

O N T H E S H O T S FROM? T O P COME THEY
O N T H E S H O T S FROM? T O P COME THEY

DEUTSCHE BANK

Anshuman Jain, a British citizen now

living in London, is co-chairman of the Management Board of Deutsche Bank along with Jürgen Fitschen. Born in Jaipur, India, he studied economics at Sri Ram College of Commerce at Delhi University and business administration at the University of Massa- chusetts Amherst. At the helm of a genuinely

global financial institution, Jain – a fluent

English and Hindi speaker, with some German knowledge – is always on the move

and used to operating across cultural and linguistic barriers.

 
German knowledge – is always on the move and used to operating across cultural and linguistic
German knowledge – is always on the move and used to operating across cultural and linguistic
German knowledge – is always on the move and used to operating across cultural and linguistic
operating across cultural and linguistic barriers.   NOKIA/MICROSOFT Stephen Elop was born in Canada, and
NOKIA/MICROSOFT
NOKIA/MICROSOFT

Stephen Elop was born in Canada, and studied computer engineering and manage- ment at McMaster University before embarking on a management career in IT and telecommunications. Elop has held senior positions at several companies, including Macromedia, Adobe Systems and Microsoft. He was appointed Nokia’s first non-Finnish CEO in 2010, but moved back to Microsoft as Nokia Executive Vice President of Devices and Services when the latter acquired Nokia’s Devices and Services business in September 2013.

 
   
   
and Services when the latter acquired Nokia’s Devices and Services business in September 2013.    
and Services when the latter acquired Nokia’s Devices and Services business in September 2013.    

Harvard Business School. Through her work

senior executives on strategy development

within corporations. She divides her time

national business organizations, Gadiesh

Bain & Company, holds degrees from The

corporate strategist and chairwoman of

and her involvement in an array of inter-

and, in particular, change management

has worked with hundreds of CEOs and

Orit Gadiesh, an Israeli-American

Hebrew University of Jerusalem and

BAIN & CO

on client work between North America, Europe and Asia.
on client work between North America,
Europe and Asia.
PRUDENTIAL Tidjane Thiam, a dual Ivorian and French citizen and CEO of Prudential plc since
PRUDENTIAL
Tidjane Thiam, a dual Ivorian and
French citizen and CEO of Prudential plc
since 2009, studied in France and has a
background in advanced mathematics and
physics. He started his professional career
at McKinsey in Paris and New York before
relocating to Côte d’Ivoire to become CEO
and later chairman of the National Bureau
for Technical Studies and Development;
as Secretary of Planning and Development,
he was also a cabinet minister. Thiam
held senior positions at McKinsey and
Aviva before joining Prudential in 2008.
he was also a cabinet minister. Thiam held senior positions at McKinsey and Aviva before joining

PEPSICO

Indra Nooyi, chairwoman and CEO of PepsiCo since 2006, is a US citizen, but was born in Madras (now Chennai), India. Nooyi received a bachelor’s in physics, chemistry and mathematics from Madras Christian College in 1974 and a master’s in public and private management from Yale School of Management in 1978. Before joining PepsiCo in 1994, Nooyi served, inter alia, as Senior Vice President of Strategy and Strategic Marketing for Asea Brown Boveri and Vice President and Director of Corporate Strategy & Planning at Motorola.

Marketing for Asea Brown Boveri and Vice President and Director of Corporate Strategy & Planning at
Marketing for Asea Brown Boveri and Vice President and Director of Corporate Strategy & Planning at
THE COCA-COLA COMPANY
THE COCA-COLA COMPANY

Muhtar Kent, a New York-born Turkish- American, has been chairman and CEO of The Coca-Cola Company since 2009, having originally joined the firm in Atlanta in 1978. In the course of his career, he has held a variety of leadership positions, including General Manager of Coca-Cola Turkey and Central Asia, President of the East Central Europe Division and Senior Vice President of Coca-Cola International, with responsibility for 23 countries. He sits on numerous high-level international business committees.

International, with responsibility for 23 countries. He sits on numerous high-level international business committees.
ABB Ulrich Spiesshofer, who holds a
ABB
Ulrich Spiesshofer, who holds a

master’s in business administration and engineering and a PhD in economics from the University of Stuttgart, hails from Germany. He became CEO of the ABB Group – a world leader in power and automation technologies – in September 2013. Spiess- hofer has worked in multiple jurisdictions, including Germany, Switzerland and Australia, and now runs a company with global revenues of nearly USD 40 billion, approximately 145,000 employees and operations in around 100 countries.

global revenues of nearly U S D 40 billion, approximately 145,000 employees and operations in around
global revenues of nearly U S D 40 billion, approximately 145,000 employees and operations in around
global revenues of nearly U S D 40 billion, approximately 145,000 employees and operations in around
145,000 employees and operations in around 100 countries. Carlos Ghosn, French-Lebanese-Brazil- ian manager and

Carlos Ghosn, French-Lebanese-Brazil- ian manager and simultaneously chair- man and CEO of Paris-based Renault and Japan-based Nissan, is a global citizen. Of Lebanese descent, Ghosn was born in Brazil but returned to Lebanon with his mother at the age of six. He then moved to Paris to study engineering, graduating from École Polytechnique in 1978. The first 18 years of Ghosn’s career were spent at Michelin (in Brazil and the USA); he has been CEO at Nissan and Renault since 2001 and 2005, respectively.

RENAULT/NISSAN

Brazil and the USA ); he has been C E O at Nissan and Renault since
AB INBEV Carlos Brito is CEO of Anheuser-Busch InBev, the leading global brewer and one
AB INBEV
Carlos Brito is CEO of Anheuser-Busch
InBev, the leading global brewer and one
of the world’s top five consumer products
companies. A Brazilian citizen, Brito
earned a degree in mechanical engineering
from the Universidade Federal do Rio de
Janeiro in Brazil and an MBA from Stanford
University. He joined Anheuser-Busch
InBev in 1989 and was appointed CEO
in December 2005. Prior to joining the
company, he held positions at Shell Oil
and Daimler Benz.
company, he held positions at Shell Oil and Daimler Benz. NESTLÉ Paul Bulcke, CEO of Nestlé
NESTLÉ Paul Bulcke, CEO of Nestlé S.A. since
NESTLÉ
Paul Bulcke, CEO of Nestlé S.A. since

for markets, in places as diverse as Switzer-

2008, may have stuck loyally to his employ-

Canada and the Caribbean.Unsurprisingly,

to all corners of the globe. Born in Belgium,

Bulcke is something of a polyglot, speaking

er since 1979, but his career has taken him

the Czech and Slovak Republics, the USA,

Bulcke has worked, or been responsible

land, Germany, Spain, Peru, Portugal,

French, English, Spanish, Portuguese and German in addition to his native Dutch.
French, English, Spanish, Portuguese
and German in addition to his native Dutch.

GLOBAL INVESTOR 2.13

16

“The core role that migrants play in economic development is often overwhelmed by defensive measures to keep migrants out.”

the world economy over 25 years. There are, however, legitimate concerns about large-scale migration. The possibility of social dislo- cation is real. Just like globalization – a strong force for good in the world – the positive aspects are diffuse and often intangible, while the negative aspects bite hard and tangibly for a small group of peo- ple. The second myth is that migration destroys developing economies by siphoning talent away from the places that need it most. There is some truth to this. For example, 65% of university graduates from Morocco, 60% from Gambia, 25% from Iran and 10% from the Phil- ippines leave their home country, usually to move to a developed economy. However, the so-called “brain drain” is mitigated twice over. First, when these countries become professional training centers, they can produce far more skilled laborers at home than they did before the “drain” began. The Philippines, for example, provides one of the largest sources of migrant nurses to developed economies. But

while doing so, it now also has more nurses per capita in its domes- tic labor market than comparable countries and even some much richer ones, including Great Britain. Second, remittances (money sent home from migrant workers to their families and friends) from abroad are integral to many developing economies. Remittance payments lift people out of poverty. Their impact, if used for entrepreneurship or investment at home, is often many times the original value. In 2012, officially recorded remittance flows to developing countries reached an estimated USD 401 billion. For Tajikistan, these flows amount to almost half of GDP and for Liberia and Lesotho around 30%. If man- aged appropriately, with good governance and smart investments, the “brain drain” can become the “brain gain” for developing economies. Promoting “brain circulation” by which skilled migrants are able to return to their home countries and bring with them the technologies and investment opportunities derived from their migrant experiences can also play an important role in launching domestic growth, as Taiwan, Israel and Bangalore in India demonstrate.

The bottom line

In the future, it will become even more imperative to ensure a strong labor supply augmented by foreign workers. Globally, the population is aging. There were only 14 million people over the age of 80 living in 1950. There are well over 100 million today, and current projections indicate nearly 400 million people over 80 by 2050. With fertility col- lapsing to below replacement levels in all regions except Africa, rap- idly rising dependency ratios and a decline in the OECD workforce from around 800 million to close to 600 million by 2050 is projected. The problem is particularly acute in Europe, North America and Japan. But the developing world will feel the pinch too; by 2050, some 20% of India’s population and a total of 31% of China’s are projected to be aged 65 or older.

Migrants: a key component of the workforce in major developed markets

Migrants are a vital part of the total population in a number of countries in the developed world. The large pies show what percentage of the entire populace are migrants. The smaller colored charts indicate the proportion that migrants make up within specific age groups. Source: UN DESA

International migrant stock as a percentage of the nation’s overall population. stock as a percentage of the nation’s overall population.

Of the nation’s 25–29 age group, the percentage who are migrants. group, the percentage who are migrants.

Of the nation’s 30–34 age group, the percentage who are migrants. group, the percentage who are migrants.

Of the nation’s 35–39 age group, the percentage who are migrants. group, the percentage who are migrants.

14.3% USA
14.3%
USA
35–39 age group, the percentage who are migrants. 14.3% USA 18.7% 22.7% 25.4% 12.4% United Kingdom

18.7%

35–39 age group, the percentage who are migrants. 14.3% USA 18.7% 22.7% 25.4% 12.4% United Kingdom

22.7%

35–39 age group, the percentage who are migrants. 14.3% USA 18.7% 22.7% 25.4% 12.4% United Kingdom

25.4%

12.4% United Kingdom 22.8% 25%
12.4%
United Kingdom
22.8%
25%
35–39 age group, the percentage who are migrants. 14.3% USA 18.7% 22.7% 25.4% 12.4% United Kingdom

21.4%

GLOBAL INVESTOR 2.13

17

Additional details on our map MODERN MIGRATION on page 8
Additional
details on our
map MODERN
MIGRATION
on page 8

Reasons for migration

The grounds for moving are many. But the main driver is economic, as high-skill migrants bring specialized talents, while lesser-skilled laborers fill short-term gaps.

Source: Ian Goldin

Conflict migration

2 million

gaps. Source: Ian Goldin Conflict migration 2 million Despite the fact that migration is a vital

Despite the fact that migration is a vital element in global development, there is no global organization up to the monumental task of assisting the flow of people across borders. International migration is the orphan among the alphabet soup of global governance organizations. The International Organization for Migration is not part of the United Nations and could be transformed to play a more active, treaty-based global role. A first task is to establish an agreed definition of migration and develop a global database, as there is no common statistical basis for analysis and to inform shared policies. The second objective is to develop rules that can assist migrants, not least with respect to pension portability, temporary work permits and basic rights. Migration has always been the key driver of human progress and dynamism. In the age of globalization, the rising barriers being erected to migrants pose a threat to economic growth and the sustainability of our econ- omies and societies. Free migration, like totally free trade, remains a utopian prospect, even though within regions such as Europe this has proved workable. Greater attention needs to be given to the manage- ment of migration. As John Stuart Mill argued, we need to ensure that the real local and short-term social costs of migration do not

Social migration

2 million

social costs of migration do not Social migration 2 million Economic migration 5 million Student migration

Economic migration

5 million

not Social migration 2 million Economic migration 5 million Student migration   3.5 million Other reasons

Student migration

 

3.5

million

  3.5 million Other reasons   2.5 million
  3.5 million Other reasons   2.5 million
  3.5 million Other reasons   2.5 million
  3.5 million Other reasons   2.5 million

Other reasons

 

2.5

million

3.5 million Other reasons   2.5 million 22.4% 28.9% Switzerland 35.2% 42.9% 43.9% 11.9% Germany

22.4%

28.9% Switzerland 35.2% 42.9% 43.9%
28.9%
Switzerland
35.2%
42.9%
43.9%
11.9% Germany 17.1% 20.3%
11.9%
Germany
17.1%
20.3%
Chapter II TECHNOLOGY ENABLERS Mobile technology has radically changed the world over the past decade,
Chapter II
TECHNOLOGY
ENABLERS
Mobile technology has radically changed the world over
the past decade, with mobile penetration soaring, impacting
banking, travel and many other key industries.
Keeping cities moving
page 20
So far, yet so near
page 24
Innovation welcome
in a USD 40-billion
business
page 26
Mobile payment
users by region

THE INCREDIBLE RISE OF MOBILE BANKING

The total number of users of mobile payments rose by 55% between 2009 and 2010, to 109 million. The greatest number of mobile payment users is found in Asia Pacific, far ahead of any other region.

Source: KPMG

MOBILE PENETRATION ACROSS THE GLOBE

The number of mobile subscriptions per 100 people increased by more than 60 between 2007 and 2012 in countries such as the Russian Federation, Brazil, Saudi Arabia, Egypt, and Indonesia.

Change in mobile subscriptions per 100 people in 2012 compared to 2007

CANADA

USA

MEXICO

> 60 40–60 20–40 < 20
> 60
40–60
20–40
< 20

Source: UN, World Bank

23.4
23.4

Latin America

8,010,000

MEXICO > 60 40–60 20–40 < 20 Source: UN, World Bank 23.4 Latin America 8,010,000 North

North America

3,502,000

GLOBAL CROWDFUNDING VOLUME IN 2012

10 MOST CONGESTED CITIES

The total volume of funds raised through crowdfunding grew by 81% to reach USD 2.7 billion in 2012.

In million USD

North America Europe 1,606 945 South America Africa 0.8 0.1
North America
Europe
1,606
945
South America
Africa
0.8
0.1

Asia

Source: Statista/massolution

Three Belgian cities rank among the ten most congested European and North American cities – a quite unenviable track record. In the USA, the two worst-affected cities are Los Angeles and San Francisco. Only commute trips made during peak hours, during the week, were used to

compile this data.

33 over

the last 12 monthsduring the week, were used to compile this data. 33 over Oceania 76 BRUSSELS Belgium LONDON

Oceania

76

compile this data. 33 over the last 12 months Oceania 76 BRUSSELS Belgium LONDON United Kingdom

BRUSSELS Belgium LONDON United Kingdom ANTWERP Belgium ROTTERDAM Netherlands LOS ANGELES USA PARIS France STUTTGART Germany COLOGNE Germany GHENT Belgium SAN FRANCISCO USA

85.4

81.7

76.7

65.1

62.8

60.0

59.9

56.8

54.8

53.5

Source: Inrix

60.0 59.9 56.8 54.8 53.5 Source: Inrix Western Europe 7,127,000 UNITED KINGDOM FRANCE SPAIN GERMANY

Western Europe

7,127,000

UNITED

KINGDOM

FRANCE

SPAIN

GERMANY

ITALY

NIGERIA

SAUDI

ARABIA

UAE

INDIA

Total 42.5 13.9
Total
42.5
13.9

Europe, Middle East and Africa

27,091,000

CHINA

Total

0.5 1 5 10 Bilateral remittances estimates for 2011 using migrant stocks, host country incomes
0.5
1
5
10
Bilateral remittances estimates
for 2011 using migrant stocks,
host country incomes
20
and origin country incomes
in billion USD
FLOWS OF INTERNATIONAL
REMITTANCES

Nearly a quarter of the total interna- tional remittances sent stem from the USA, while India and China are by far the largest remittance-receiving countries.

46.4

Source: WorldBank

JAPAN

HONG KONG PHILIPPINES 18.9
HONG KONG
PHILIPPINES
18.9

AUSTRALIA

the largest remittance-receiving countries. 46.4 Source: WorldBank JAPAN HONG KONG PHILIPPINES 18.9 AUSTRALIA 62,828,000

62,828,000

GLOBAL INVESTOR 2.13

20

GLOBAL INVESTOR 2.13 — 20 MASS TRANSIT Keeping cities moving More and more of the world’s

MASS TRANSIT

GLOBAL INVESTOR 2.13 — 20 MASS TRANSIT Keeping cities moving More and more of the world’s

Keeping

cities

moving

More and more of the world’s people are living in (sub-)urban settings. This is stretching many mass transport systems to the breaking point. Sustainable transport expert Dario Hidalgo says governments need to rethink public transport, focusing on quality, safety and integration.

INTERVIEW by Richard Hall

GLOBAL INVESTOR 2.13

21

Guangzhou Specially

marked BRT (bus rapid transit) lanes connect the city’s mass rapid transit stations, ensur- ing that there are practically no delays in getting riders to their destinations on time.

GLOBAL INVESTOR 2.13

22

GLOBAL INVESTOR 2.13 — 22 been appalling. Clearly, creating more roads does not solve congestion; it

been appalling. Clearly, creating more roads does not solve congestion; it brings more cars to the streets. It’s like trying to fight obesity by expanding the size of our pants! Several cities – Seoul, San Francisco, Toronto, Vancouver – have actually begun removing urban highways and replacing them with public-transport infrastructure. We urgently need to reallocate funding from urban parking and highways to sustainable transport. Where are you currently involved in BRT projects? How important is it to be on site? Dario Hidalgo: We support sustainable mobility and urban development initiatives in Mexico, Brazil, Peru, Turkey, India and China. We also work with researchers from Chile, USA, Portugal and Australia via the ALC-BRT Centre of Excellence (www.brt.cl), and support 30 Latin American transit agencies in their quest for quality and integration (www.sibrtonline.org). On-site meetings are particularly important when it comes to convincing decision makers. Where are the biggest BRT projects today? Dario Hidalgo: The construction of a 150 km BRT network in Rio de Janeiro in preparation for the FIFA World Cup and 2016 Summer Olympics, and the expansion of Metrobús in Mexico City from 95 to 200 km are two notable examples. The introduction of BRT in Mumbai and Bangalore may be among the most challenging, and capacity enhancements in the saturated corridors of Bogotá and Istanbul will certainly be major undertakings. We expect around 30 cities to introduce BRT primarily in Asia – but also, in the near future, Africa. How is MRT/BRT changing mobility patterns in both the developed and developing world? Dario Hidalgo: We have observed a cultural shift in Europe and, increasingly, the USA. People used to aspire to live in a house in the suburbs and commute. Today, more and more people want to live in the city itself – in denser, mixed-use areas. We don’t know how this trend will evolve in

Dario Hidalgo has spent the last 24 years helping local and national governments in Latin America, Asia and Africa plan sustainable public transport systems. He publishes regularly in academic journals and holds training courses worldwide. Dr. Hidalgo is based at NGO EMBARQ’s in Bogotá, Colombia.

Richard Hall: How did you get into mass rapid transit (MRT) and bus rapid transit (BRT)? Dario Hidalgo: After completing a PhD in urban transport planning in 1997, I joined Mayor Enrique Peñalosa’s team and worked on planning the TransMilenio bus system in Bogotá. The government had initially want- ed a metro, but it became clear that a BRT network could be built more quickly and at lower cost. It was part of a large-scale ur- ban transformation in my home city and was an instant success. I have since been in- volved in more than 20 projects worldwide – including in cities in Mexico and others as diverse as Lima, Accra, Istanbul and Indore. The TransMilenio BRT project in Bogotá has become quite famous. Why? Dario Hidalgo: TransMilenio is a low- cost, high-impact system. The first phase (40 km) was completed in just three years (19982000). It captured international at- tention due to its high capacity – more than 40,000 passengers per hour, per direction – and an innovative public-private partnership model. The city builds the infrastructure, and local entrepreneurs (currently seven groups with nearly 2,000 buses) own and operate Today the BRT is 106 km long and carries more than two million passengers a day. Its success helped mainstream the concept worldwide. Our database www.brtdata.org indicates that 150 cities have BRT and bus corridors; 115 of these have been created since 2000.

Can you describe some of the typical pitfalls you face when building a BRT network? Dario Hidalgo: Experience around the globe shows the great potential of BRT, but planning, financing and organizational diffi- culties should not be papered over. The im- portant thing is not to rush into implementa- tion until all the planning has been thought through. Also, every city is unique, so copy/ paste doesn’t work. Most of the obstacles are institutional rather than technical. Such projects are inherently complex as they involve aligning a baffling array of interests. Strong political leadership and well-crafted communications are essential. One of the big advantages of BRT systems is that they can frequently be realized within an elected leader’s term of office. A new report written by the Institute for Transportation and Development Policy and EMBARQ is titled “The Life and Death of Urban Highways.” Your thoughts? Dario Hidalgo: Traditionally, urban trans- port planning has been all about moving cars, not necessarily people. As a result, most cities in the world have focused on expanding road networks. The result has

“Urban transport planning has been all about moving cars, not necessarily people.”

GLOBAL INVESTOR 2.13

23

Photo: Institute for Transportation & Development Policy

1

1 Bogotá A combination of pedestrian cros- sings, footbridges, cycle paths, roads and bus lanes ensures that commuters and other travelers can reach their destinations safely and efficiently, regardless of the mode they opt for.

2 Guangzhou China’s bike-sharing

programs are the biggest in the world. As in Hangzhou, there will also be well over 100,000 bicycles provided for public sharing programs in Guangzhou by 2020.

provided for public sharing programs in Guangzhou by 2020. 2 the developing world, but mass transit
provided for public sharing programs in Guangzhou by 2020. 2 the developing world, but mass transit

2

the developing world, but mass transit plan- ning provides an excellent opportunity to influence the future shape of cities. Places such as Copenhagen, Curitiba and Singa- pore show how successful strategies that dovetail land use and transport planning can be. We must adapt these models to fit the needs of rapidly emerging economies. This needs to happen fast before car-cen- tric urban sprawl takes root. Interestingly, the Chinese cities of Wuhan and Hangzhou have set up the two largest bike-sharing programs in the world (90,000 and 60,000 bicycles, respectively). Hangzhou plans to expand to 175,000 bikes by 2020. It’s a revolution on two wheels! China now also leads the world in metro systems, with Beijing and Shanghai already surpassing London as the longest networks. Public transport usage is very high in Latin America. In US cities, it accounts for just 3%– 4% of urban trips. How do you see this evolving? Dario Hidalgo: Transit ridership is grow- ing rapidly in the USA. More people are choosing urban lifestyles. In the major ur- ban centers a culture of membership rather

than ownership is emerging thanks to social networks and car-sharing programs. In Latin America, on the other hand, we see the opposite trend: a growing middle class is now able to own more cars and motorcy- cles, and public transport usage is declining in most cities. The key in Latin America is to improve service and safety, which may require subsidies, and to introduce conges- tion charging and parking management schemes. How do you see the future of MRT/BRT as cities expand and technology develops? Dario Hidalgo: Some of the key innova- tions are in vehicle technology. Trains are are catching up with cleaner propulsion technologies such as natural gas and hybrid electric. The overarching goal must be to create multimodal, integrated public-trans- port networks with “last mile” connectivity to onward transit services as well as car and bike sharing. Mobile user interfaces, which are improving all the time as smartphone penetration rises, play an increasingly important role here. Smart ticketing systems, including electronic purses, are likewise

becoming available on mobile devices. I see these technologies being further integrated - ing innovation turning everything on its head. Can you describe your most unusual MRT/BRT journeys? Dario Hidalgo: Crossing the Bosporus Strait and jumping on and off the fast and frequent Istanbul Metrobüs; gliding through The Strip in Las Vegas on a shiny golden bus-cum-tram; and rattling through hectic and historic Mexico City in a hybrid bus. My most surreal experience was sharing a train carriage with 700-plus people in Mumbai, which has the world’s highest

GLOBAL INVESTOR 2.13

24

GLOBAL INVESTOR 2.13 — 24 MOBILE CONNECTIONS So far, yet so near As mobile technologies increasingly

MOBILE CONNECTIONS

GLOBAL INVESTOR 2.13 — 24 MOBILE CONNECTIONS So far, yet so near As mobile technologies increasingly

So far, yet so near

As mobile technologies increasingly facilitate Internet access from anywhere and at any time, a new economy is arising. It is not only reshaping the way people interact, work and learn, but also increasing productivity – bringing people, processes, data and things closer to build a smarter world.

TEXT Uwe Neumann, Senior Equity Analyst, Credit Suisse

In the 1990s, the PC was the “go-to” device to access the Internet. Not anymore. The rising penetration of mobile phones has placed the Internet in our pockets (mobile Inter- net). According to Ericsson’s mobility report, total global smartphone subscriptions hit the one-trillion mark in 2012, and will reach 4.5 trillion by the end of 2018, covering more than 60% of the world’s population. Making use of this im- mense potential means exploring new ways of communicat- ing – possibly redefining the concept of mobility altogether. The next step is connecting people, processes, data and things. Cisco calls this the “Internet of Everything” and pre- dicts that things connected to the Internet will surge from 10 trillion to 50 trillion by 2020, essentially creating many new networks. This will likely reshape the way people work, interact and learn. It can, in turn, be capitalized on by com- panies globally through improving productivity, accessibility and visibility. Imagine that a medical procedure is not con- ducted in a doctor’s office anymore, but that a patient wait- ing for a check-up receives a scanner in the form of a pill delivered to the home. The pill is then swallowed and the information is automatically transferred to the treating doctor over the Internet. Here, for the patient, mobility means not having to travel while still receiving a service. According to Cisco, USD 2.5 trillion of value over the next ten years will likely be generated globally through higher labor efficiencies and improving collaboration. Technology trends, such as cloud and mobile computing, virtualization, Big Data and increased processing power, are driving this “Internet of Everything” economy. Given the huge opportunities of the market envi- ronment, CIOs worldwide have become more attuned to the

mobile-first technologies, and are increasingly noting the critical importance of a mobility strategy to remain com- petitive in future. A mobility strategy ticks several boxes. One major box is enabling employees to better collaborate and use the expo- nential power of networks. Metcalfe’s Law – named after the founder of network equipment company 3Com, Robert Met- calfe – states that the value of a network increases propor- tionately to the square of the number of users. This means that people not only simply use the network, e.g. a virtual Internet meeting, to gain information about a company’s ini-

tiatives, but that a “network effect” can also be achieved, allowing people to quickly find the person best suited to provide advice/services for customers or process develop- ment. Other examples are virtual research and development teams, which increase the mobility of knowledge. Mobile virtual collaboration teams are enhancing and managing cre- ativity, increasing knowledge-sharing, adding cultural as- pects and improving organizational performance. However, this is not limited to large firms or the office workspace in general. Smaller companies (SMEs) can now gain access to information, education and advice from experts in highly specialized fields transcending geographic boundaries. Vir- tual platforms enable finding specialized employees easily and even find temps for one-off tasks, without having to provide a workspace. Some SMEs can even take shape in a virtual mobile Internet world, where like-minded people work

together on a project without ever meeting

in person. On a

private basis, shared painting applications offer an opportu- nity to participate in a painting project where various painters

from around the

world work on a single picture. While this

does not (yet) replace meeting in person, it enables people to acquaint themselves with their counterparts and to lay the

foundation for relationships.

Another box needs to tick is

that a successful firm’s mobility strategy the ability to share large digital files and

provide intelligent digital work platforms to bridge the phys- ical gap and share both work and ideas immediately on a global basis. Tele- and video-conferencing solutions should be accessible from a variety of mobile devices. According to IT research firm IDC, one interesting trend is the use of more web-based software solutions, such as Microsoft Lync, over traditional ones that require special hardware in cases such as video-conferencing. In this context, two IT infrastructure trends support the increasing use of software-defined mobil- ity solutions. First there is the already well-known Bring Your Own Device (BYOD) trend. It enables an employee to stay connected with family and friends, while also with the com- pany’s network by using their own mobile devices. Second is the Bring Your Own Application (BYOA) trend whereby employees can use cloud-based applications from external providers and the corporate network at the same time on their own devices. For example, a single department of a firm could decide to use a meeting application, such as CloudOn, GoToMeeting or Asana, downloaded from an ex- ternal provider to arrange or attend meetings virtually, share files or collaborate on projects. This could turn out to be

Collaboration, video, mobility drive value in the IoE economy

In the Internet of Everything (IoE), there continues to be exponential increase in the connectivity between people, processes, data and things. By 2020, the number of such connections is predicted to grow from 10 trillion to 50 trillion. Cisco foresees that an incredible USD 14.4 trillion will be at stake in the new IoE economy, as the ever-changing capabilities of collabora- tion, video and mobility will facilitate the sharing of insights and data while cutting costs, accelerating innovation and reducing time to market.

Source: Cisco M2P USD 3.5 tn M2M USD 6.4 tn P2P USD 4.5 tn
Source: Cisco
M2P
USD 3.5 tn
M2M
USD 6.4 tn
P2P
USD 4.5 tn

People-to-peopleCisco M2P USD 3.5 tn M2M USD 6.4 tn P2P USD 4.5 tn Machine-to-machine Machine-to-people GLOBAL

Machine-to-machine3.5 tn M2M USD 6.4 tn P2P USD 4.5 tn People-to-people Machine-to-people GLOBAL INVESTOR 2.13 —

Machine-to-people6.4 tn P2P USD 4.5 tn People-to-people Machine-to-machine GLOBAL INVESTOR 2.13 — 25 Uwe Neumann, CEFA

GLOBAL INVESTOR 2.13

25

Machine-to-people GLOBAL INVESTOR 2.13 — 25 Uwe Neumann, CEFA , joined Credit Suisse Private Banking in

Uwe Neumann, CEFA, joined Credit Suisse Private Banking in 2000 as an equity analyst responsible for the telecom and technology sector. He has 28 years of experience in the securities and banking business, including 18 years in research. He holds a Master in Economics from the University of Constance, Germany.

much more efficient compared to the company’s own col- laboration tools, which may not be specialized enough for the department’s own purposes. In addition, employees can even create their own applications, which they can use or share with others over the companies’ communication net- works. However, these initiatives on the part of companies to encourage employees to take advantage of a highly con- nected virtual world require investments in IT infrastructure. Companies are thus setting up cloud-based and virtualized IT infrastructures that make their operating systems inde- pendent of the hardware. But there is also a flip side. The BYOD and BYOA business practices also leave companies vulnerable to cybercrime. With the proliferation of data communication in the virtual world, the number of cyberattacks is increasing exponentially. According to a United Nations report, more than USD 1 trillion was lost in cyberspace in 2008 due to online fraud, identity theft and loss of intellectual property globally. In addition, demand for privacy is rising, as not only can people’s online activities be tracked and moni- tored, but also their offline ones as a result of location signals from mobile devices. Swifter data processing, greater efficiency, indepen- dency of location, instant information retrieval and cost re- ductions are all benefits waiting to be reaped and are likely to outweigh the risks and disadvantages. The new opportu- nities allow us to become smarter in everything that we are doing together – from receiving medical care to developing ideas and realizing their benefits – be it in a virtual space or face-to-face in the real world when we move beyond the

ideas and realizing their benefits – be it in a virtual space or face-to-face in the

GLOBAL INVESTOR 2.13

26

Where brick-and-mortar retail banking doesn’t exist, smartphone technology and other modern systems are enabling
Where brick-and-mortar retail banking
doesn’t exist, smartphone technology
and other modern systems are enabling
those in emerging economies to access
mobile financial services.
Photo: BFG Images

GLOBAL INVESTOR 2.13

27

MOBILE MONEY
MOBILE MONEY
GLOBAL INVESTOR 2.13 — 27 MOBILE MONEY Innovation welcome in a USD 40-billion business Countless millions

Innovation welcome in a USD 40-billion business

Countless millions in poorer regions of the world depend on the cash transfers that migrant family members remit from abroad. But accessing those payments and obtaining other vital financial services have not always been easy. The situation is beginning to change, as banks and telecom operators are now establishing partnerships.

TEXT Christine Schmid, Head of Global Financials Research, and Javier Lodeiro, Equity Research Analyst, Credit Suisse

Migrants transferring remittances to their home countries have an important economic impact on many developing economies. As large sums are transferred through informal channels, the exact figure is USD 406 billion was sent home by migrants to developing countries in 2012, repre- senting roughly the combined 2012 gross domestic product (GDP)

growth in selected countries, highlighting a stable growth pattern. In

to developing countries will grow to USD 534 billion by 2015. On average, each of the 231 million migrants sends USD 1,800 to her or his family per year. This cash flow is critical as many of these pay- ments are made to poorer parts of the world population that struggle to make up for money shortfalls, especially in times of economic turbulence. As such, remittances exhibit a countercyclical behavior and contribute to reducing poverty. Often excluded from traditional forms of banking, the beneficiaries rely on such payments for their consumption of daily goods or financing projects. These days, classic remittances are supported by new service models and technological development, which thus helps to support economic growth. Owing to the increasing adoption of smartphones worldwide, and with Internet data traffic growing at high double-digit rates, tradi- tional forms of banking such as branching and ATMs (automated teller machines) are no longer sufficient. As a result of modern tech-

>

nology, new companies are entering this line of services with an in- creasingly bright future. Modern forms of banking can supplement remittances and diversify a country’s financing needs. Over the last 15 years, growth in remittances has been fastest in Asia and the Pacific, followed by Africa, while the slowest growth has occurred in the Middle East. The graph on page 28 shows remittance

total, the 2008 financial crisis had no significant impact on remit- 10% of GDP in many countries, such as the Philippines, Bangladesh and Haiti.

Today’s remittance service providers at risk

Given the dependence on remittances in some countries, public aware- ness is focusing on the transaction costs of remittances. Accord- 10% or USD 40 billion of funds remitted annually. In some countries, remittance fees can exceed 15% (e.g. in Japan it is 18%). The estimated an- nual remittance fees of USD 40 billion are a sizeable amount consid- ering that in particular it is migrant families with modest backgrounds who rely on them. To maximize the impact of remittances on local economies, the G8 embarked on the “5x5” objective in 2009, aimed at reducing the cost of remittances by 5% p.a. within five years.

GLOBAL INVESTOR 2.13

28

TWO SUCCESSFUL FINANCIAL SERVICES MODELS

2.13 — 28 TWO SUCCESSFUL FINANCIAL SERVICES MODELS DEVELOPED WORLD LENDING CLUB This company is active

DEVELOPED WORLD

LENDING CLUB

This company is active in offering a peer-to-peer social network in the USA that brings borrowers and investors together online and leaves the banks out of the picture. Lending Club checks the borrower’s request for a loan, based on the information submitted, and assigns the loan with respective interest payments if approved. The inves- tors buy Noteswhich represent a portion of a loan. The company earns money by collecting small fees from both the borrower (one-time processing fee) and investors (service fee). For the low 10% of applications that are successfully granted a loan (thus implying a focus on creditworthy borrowers), the result is lower rates and quicker processing, while lenders obtain higher rates. As such, investors have earned an average net annualized return of over 9.5% since 2007.

an average net annualized return of over 9.5% since 2007. EMERGING WORLD M-PESA A highly successful

EMERGING WORLD

M-PESA

A highly successful example of how to succeed in a devel-

oping country with mobile money technology is Kenya’s M-PESA, which is used by 40% of the country’s adult pop- ulation. The number of domestic transactions now exceeds Western Union’s transactions worldwide, making up 17% of Kenya’s GDP in 2011. The system is based on an idea from Vodafone whose affiliate Safaricom cooperated with the Central Bank of Kenya and successfully recognized the ability of mobile phones to lower the costs of transactions for poor people. Without even visiting a bank, customers are able to deposit cash, exchange it for electronic value

at retail outlets such as gas stations, and withdraw or use

it for payments if desired. The company has capitalized

on strong latent demand for domestic remittances, a lack

of different systems and competition, transparent pricing,

a supportive banking regulator and its presence in rural

areas, thereby quickly establishing a critical mass of customers. Crucially, these customers gained trust in the system very quickly due to the advanced technology of the company Rackspace, which used a satellite streaming strategy and experienced professionals to enable security, constant real-time transaction data and 24-hour custom-

er support. M-PESA’s ability to make every transaction profitable distinguishes it from banks that often struggle to make money from small-value customers, without engaging in business relationships with them.

Growth of remittances in selected countries Remittances from migrant family members abroad to those living in emerging countries have seen a steady increase over the last two decades. This rate accelerated, in some cases significantly, as we entered the new millennium. Remittances to Nigeria increased ninefold between 2004 and 2009, surpassing the amounts sent home to those in Pakistan, Bangladesh and, briefly, the Philippines. Source: World Bank

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Remittances of selected
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Remittances of selected countries (USD bn)
Bangladesh
Nigeria
Pakistan
Philippines
2000
25
1999
1998
20
1997
1996
15
1995
1994
10
1993
1992
5
1991
1990
0

GLOBAL INVESTOR 2.13

29

Thus, the final savings in remittance fees over the five-year period would exceed USD 9 billion by 2014. costs have contracted by 9.8% since 2008 (and by 15.9% if special- savings achieved are definitely positive for the receivers, the targets have been missed so far, and more has to be done. As usual, com- petition is a key driver for lowering transaction fees. Mobile banking or modern banking models in general could reduce the transaction costs of remittances. New models could also be used to underwrite loans for projects and ultimately fund the economy using new technol- ogy to circumvent the lack of traditional banks.

- tial of mobile phones to capitalize on the “unbanked” population, reduce costs and facilitate remittance payments, there are a few pitfalls that need to be avoided. After all, mobile financial services do not have a high penetration in all growth markets yet. In many emerging econo- mies such as Tanzania, Ghana and Kenya (see the box on M-PESA) people have never done business with a bank, but are using mobile financial services regularly. In countries such as Pakistan, Nigeria, Argentina and India there is still considerable potential to improve the use of mobile financial services. One difficulty lies in the fragmented structure and lack of convergence in the mobile technology systems. Other problems include the reluctance of banks to engage in partner- ships with telecom operators, the unregulated nature of the business, network security, customer privacy, liability, fraud prevention and standardization. Hence, governments need to assist by creating a regulatory framework, and companies need to adapt their business models to their customers. Under these circumstances, it follows that traditional companies offering financial services such as banks are only partially key to ac- points in the right direction, a solo attempt by banks will not suffice to minimize costs. Instead, mobile network operators with the tech- nological know-how to develop relevant services and systems should contribute to increasing the use of mobile devices for transacting remittances, and thus lower costs. Moreover, innovative attempts by companies to build on their clients’ Internet presence in order to evaluate their credit ratings help to generate additional sources of loans in developing countries. This can be especially fruitful where a large proportion of the population does not have access to banks and loans, but are avid users of new technologies. Similarly, in the case of developed markets, companies like Lending Club (see box) also aim at reducing transaction costs by omitting an intermediary financial institution. Last but not least, willingness among banks to engage in partnerships with mobile operators as seen by the Kenyan company M-PESA (see box) is also critical to ensuring the ongoing success of

box) is also critical to ensuring the ongoing success of Christine Schmid CFA , is Head

Christine Schmid CFA, is Head of Global Financials has covered Financials for 14 years and coordinates the Javier Lodeiro CFA, FRM insurance sector and US

Additional details on our map TECHNOLOGY ENABLERS on page 18
Additional
details on our map
TECHNOLOGY
ENABLERS
on page 18

US CA DE

8.3

BRAZIL

7.1

PE CO FR AR

No Low Middle High information Inequality of economic opportunity index INEQUALITY OF ECONOMIC OPPORTUNITY Chapter
No
Low
Middle
High
information
Inequality of economic
opportunity index
INEQUALITY OF ECONOMIC OPPORTUNITY
Chapter III
SOCIAL/POLITICAL
Countries with low inequality of economic opportunity, such
as Norway, are those that have a higher degree of intergen-
erational or social mobility. Countries characterized by
greater inequality of economic opportunity, such as Brazil,
have a higher degree of income inequality.
DRIVERS
Source: IZA
Countries with low inequality of economic opportunity have
the highest social mobility. A rising number of university
graduates choose to emigrate, among them many scientists.
Moving ahead in Africa
page 32
(Un)equal
opportunity
page 36
Managing
migration
page 38
HOW WELL-EDUCATED ARE YOUR IMMIGRANTS?
US
46.9
CANADA 23.7
CN
US
UK
38.4
CA UK AU DE
USA 5.0
IN
CN

The proportion of recent migrants to OECD countries holding a university degree rose by 5 percentage points to 31% between 2000 and 2010. Luxembourg, Denmark and the Netherlands benefited most from this trend. Among the native-born popula- tion the proportion increased 4 percentage points to 29%.

University graduates as % of total, percentage-point change 2000–2010

Recent immigrants LUXEMBOURG
Recent immigrants
LUXEMBOURG

DENMARK

NETHERLANDS

GERMANY

AUSTRALIA

UNITED KINGDOM

CANADA

HUNGARY

AUSTRIA

OECD AVERAGE

USA

NEW ZEALAND

FRANCE

NORWAY

SWEDEN

BELGIUM

ITALY

SPAIN

PORTUGAL

GREECE

IRELAND

FINLAND

Native born –10 –5 0 5 10 15 20
Native born
–10
–5
0
5
10
15
20

25

Sources: Economist/OECD

COLOMBIA

PERU

ARGENTINA

28.5

26.5 TOP 10% VS. BOTTOM 10% 15.9 After taxes and transfers, the richest 10% of
26.5
TOP 10% VS. BOTTOM 10%
15.9
After taxes and transfers, the richest
10% of the population in OECD
countries earned 9.8 times the
income of the poorest 10% in 2010,
with the largest gaps recorded
in Mexico, Chile and the USA, and
the lowest in Denmark, Finland and
Multiplier
9.8
10.0
8.9
5.0
Belgium.
Source: OECD
COUNTRY
OECD AVERAGE
CANADA
USA
MEXICO
CHILE
Amount of Native scientists immigrated scientists going abroad % % Other Other origins destinations BRAIN
Amount of
Native scientists
immigrated scientists
going abroad
%
%
Other
Other
origins
destinations
BRAIN TRADE
Switzerland has the highest percent-
age of immigrant scientists. More
than half of its researchers are
non-Swiss, a large proportion being
German. On the other hand, a third
of the Swiss scientists emigrate,
with the USA and Germany being their
main destinations. On the other
extreme, Japan was the most insular
country surveyed, exchanging the
least scientific talent with the rest of
the world.
Source: IEEE Spectrum
RUSSIAN FEDERATION
SOUTH KOREA
CHINA
US UK
DE
37.6
SWEDEN
13.9
RU
DE
CA AUAU
US
32.9
UNITED
KINGDOM
25.1
IT
DE
UK
US
21.8
DENMARK
13.3
DE
US
UK
DE
27.7
NETHERLANDS
26.4
IT DE
FR
US
UK
18.2
BELGIUM
21.7
IT FR
DE
US
CH
UK
23.2
GERMANY
23.3
US
DE
56.7
SWITZERLAND
33.1
DE
US
UK
CA FR
17.3
FRANCE
13.2
IT
US
DE UK
7.3
SPAIN
8.4
IT FR AR
US UK FR
DE
3.0
ITALY
16.2
15.1
ES
DE FR
13.6
13.1
10.8
10.7
10.7
10.0
10.2
9.1
9.3
8.9
8.0
7.7
7.2
6.9
6.7
6.0
6.1
6.0
5.6
5.3
5.4
US
INDIA 39.8
IRELAND
US
5.0 JAPAN
3.1
UNITED KINGDOM
KR CN
DENMARK
NORWAY
SWEDEN
FINLAND
US
UK
BELGIUM
45.5
AUSTRALIA
18.3
CN
UK
NETHERLANDS
GERMANY
HUNGARY
POLAND
FRANCE
SPAIN
PORTUGAL
ITALY
GREECE
TURKEY
ISRAEL
AUSTRALIA
NEW ZEALAND
JAPAN
SOUTH KOREA

GLOBAL INVESTOR 2.13

32

GLOBAL INVESTOR 2.13 — 32 SOCIAL MOBILITY Moving ahead in Africa Education is often seen as

SOCIAL MOBILITY

GLOBAL INVESTOR 2.13 — 32 SOCIAL MOBILITY Moving ahead in Africa Education is often seen as

Moving ahead in Africa

Education is often seen as playing a crucial role in improving social mobility and raising incomes. However, these remain elusive goals in modern sub-Saharan Africa, which cannot yet guarantee the supply of talent it needs to industrialize nor fully absorb the talent it produces. Pedro Conceição reflects on the paradox of mobility and educational attainment in Africa.

TEXT Pedro Conceição, chief economist, regional bureau for Africa, United Nations Development Programme, New York

GLOBAL INVESTOR 2.13

33

Malawi Phoya, an author and blogger, takes a few minutes out to relax in his office in the center of the city in Blantyre.

GLOBAL INVESTOR 2.13

34

drop out of primary school.”

general, in a country like the USA, the higher the level of education, the higher the income and level of employment. In Africa we actually don’t see that everywhere. What we see in some countries – and here statistics are very poor, and a challenge – is that the higher the level of education, the higher the level of unemployment. Why? Pedro Conceição: The structure of the economy of those countries is not yet able to fully absorb highly educated people. Of course, it varies from place to place. For example, in cities like Nairobi, where you have a very sophisticated financial sector emerging, and companies building around information and communication technology (ICT), you can indeed absorb skilled workers. In fact, countries where opportunities exist in natural gas and oil have a dearth of the engineers, lawyers, accountants and financial analysts they will need to fully exploit these opportunities. At the same time, two-thirds of the labor force in Africa still live in rural areas. Pedro Conceição: Yes, and there the challenge is very different. Unlike Asia and Latin America, Africa has not had a green revolution. Agricultural productivity levels are still very low. The American economist Robert Reich has asked, “If we had a strategy designed to increase jobs and wages, what would it look like?” How would you answer that question for Africa in the context of mobility and educational attainment? Pedro Conceição: I go back to this point about agricultural productivity because the

Giselle Weiss: Broadly speaking, how would you characterize the educational landscape across Africa? Pedro Conceição: First off, it’s very important to recognize the economic prog- ress that has been achieved across the continent since the turn of the millennium. From the mid-1970s until around 2000, economic performance in Africa (and here I mean sub-Saharan Africa) was terrible. In fact, for many years, per capita growth was actually negative. Along with the resurgence in economic growth since about 2000, the share of people living on less than a dollar a day has been going down, quite rapidly. And education, too, has been improving fast. How do you measure that? Pedro Conceição: Around 1990, which is the benchmark year for the Millennium Development Goals (MDGs – something we use a lot at the UN to measure progress), about half of the population of school age was not enrolled in either primary or secondary school. The figure for enrollees is now close to 80%. The MDG is to get to 100% enrollment in primary education by 2015. We are unlikely to meet that target. But you can see that the progress has been dramatic, especially in the context of rapid population growth. That creates huge pressure to increase educa- tional opportunities. According to the UNDP’s Human Devel- opment Index (HDI), sub-Saharan African countries actually come out on top with respect to speed (not level) of progress based on indicators of income, education and health. But you’ve also said Africa is the most unequal region in the world. Pedro Conceição: When we look at the developmental challenges in Africa, we tend to focus on extreme poverty. What is less emphasized is the level of inequality in the distribution not only of income, but also education and health. In other words, a very poor child in Africa is much less likely to get to a school and to be healthy than a child from even a middle-income family. That is true everywhere, obviously, but it’s much

more accentuated in Africa. When we adjust the HDI (which is just an average) to account for inequality, Africa takes the largest hit. How does that affect social mobility in everyday life? Pedro Conceição: About 80% of the people who are employed in Africa are in what is called vulnerable employment. They are working, but they are working for their family, for their farm, for their own consumption – activities that do not nec- essarily pay a wage. If you break this down between men and women, you find that 85% of women in Africa work in vulnerable employment compared to 70% for men. Moreover, the literacy rate for women is about 65% compared to about 75% for men. This is particularly troublesome because we know that education of girls and women is very effective in driving many develop- mental outcomes.

A companion article to this interview states

that, in the industrialized West, education

is the single most important determinant of

an individual’s earnings prospects. Is that also true of Africa? Pedro Conceição: Things are changing a little bit in parts of the developed world now as a result of the financial crisis. But in

world now as a result of the financial crisis. But in Pedro Conceição is Chief Economist

Pedro Conceição is Chief Economist at the United Nations Development Programme’s (UNDP) Regional Bureau for Africa. He previously served as Director of UNDP Development Studies. He is a specialist in global public goods and on the economics of technological innovation and development.

GLOBAL INVESTOR 2.13

35

Photos: Dawin Meckel, Ostkreuz (2) / Michel Gounot, Godong, Corbis

Additional details on our map SOCIAL AND POLITICAL DRIVERS on page 30
Additional
details on our
map SOCIAL
AND POLITICAL
DRIVERS
on page 30

benefits would increase farmers’ income, reduce prices of food staples, and increase the purchasing power of people in both rural and urban areas. This could trigger demand for nonagricultural activities in rural areas, which would be a stepping stone toward industrialization. Africa has been deindustrializing. So investing in agricultural productivity is critical, as well as removing barriers to entrepreneurship and creating new business opportunities. And making the most of the technological opportunities that do exist, like ICT. Among young people who do have opportunities, to what extent have returns on educational investment in Africa been affected by brain drain? Pedro Conceição: It’s a challenge. But there are now efforts by some countries to draw on the diaspora through remittanc- es and sometimes by endeavoring to attract professionals in medicine or finance or law to come home. What are the opportunities for and barriers to the mobility of talent, both within and between African countries, and abroad? Pedro Conceição: We are not yet there at all. In fact, enhancing regional integration in Africa is a big focus of attention. For example, intra-African trade is very low – below 10%. The figure for the European Union is much higher – close to 70%. And that is just for goods, which are much easi- er to move than people. I was recently in Maputo, in Mozambique, which is still one of the poorest countries in the world, but it is having a commodity boom in natural gas and coal. Companies there need people and skills that are not available. As a result, workers are coming from outside the continent, less so from other countries in Africa. In general, moving around Africa is difficult everywhere. What are the challenges to creating greater mobility through education? Pedro Conceição: The key challenge is to ensure that children master basic literacy and numeracy skills. For this to happen, we

1

literacy and numeracy skills. For this to happen, we 1 2 1 Sokouraba, Burkina Faso Open

2

literacy and numeracy skills. For this to happen, we 1 2 1 Sokouraba, Burkina Faso Open

1 Sokouraba, Burkina Faso

Open learning: an adult literacy class pays close attention to their instructor.

2 Lilongwe, Malawi A doctor is at work

examining specimens under a microscope in the parasitology lab at a local hospital.

have to avoid children dropping out of school. In Africa, two out of five students drop out of primary school. We also have to focus on the quality of the education that is provided, not just in basic skills, but also in agriculture and new technologies. Could we come back to this issue of Africa and industrialization? Pedro Conceição: Africa is at an ad- vantage when it comes to industrialization because salaries are very low. In fact, if you look at labor costs alone, Africa could compete with China, Bangladesh, and many countries in East and Southeast Asia. But industrial activities are being squeezed between nonproductive agricul- tural expansion and low-value-added services. Moreover, the problem of indirect costs – such as good roads and a stable power supply – makes it very tough for manufacturing to progress in Africa. Yet it must progress to create the high- or even decent-paying jobs that it needs to move ahead.

The golden rule Inequality lowers mobility. In " equal " countries like Denmark, children `
The golden rule
Inequality lowers mobility. In " equal " countries like Denmark,
children ` s prospects do not depend on their parents ` standing.
In contrast, in the United Kingdom, high inequality
shapes opportunity at both ends of the income ladder.
Source: Miles Corak, in The Economics of Inequality, Poverty and Discrimination in the 21st Century (ABC-CLIO, 2013),
and Tom Hertz et al., B. E. Journal of Economic Analysis and Policy, vol. 7, pp. 1–46 (2007).
1
0.5
Association
between parent
and child earnings
Italy
United Kingdom
USA
France
0.4
Japan
Germany
0.3
New Zealand
Sweden
Canada
Australia
0.2
Finland
Norway
Denmark
0.1
2
Association
between parent and
child years of schooling
0.1
0.2
0.3
0.4
0.5
0.6

1_The vertical axis is the strength of the relationship between parent and child earnings: as you move from bottom to top, the lower the degree of income mobility across the generations. 2_The horizontal axis is the strength of the tie between parent and child years of education (i.e. how much higher a child’s education is for each extra year of parental education). As you move from left to right there is less education mobility across the generations.

GLOBAL INVESTOR 2.13

37

Photo: iStockphoto

GLOBAL INVESTOR 2.13 — 37 Photo: iStockphoto INTERGENERATIONAL MOBILITY (Un)equal opportunity Education is the

INTERGENERATIONAL MOBILITY

— 37 Photo: iStockphoto INTERGENERATIONAL MOBILITY (Un)equal opportunity Education is the single most important

(Un)equal

opportunity

Education is the single most important determinant of an individual’s earnings prospects, says Miles Corak, especially in this era of increased globalization and technological change. Income gaps within countries make a good start in life all the more important.

TEXT Miles Corak, economist, Graduate School of Public and International Affairs, University of Ottawa

In the USA and the United Kingdom, where income inequality was the greatest among rich countries a generation ago, about 50% of the earnings advantage of relatively well-to-do parents is passed on to their children. The advantages of birth, or for that matter the dis- advantages, are similar in Italy and France, where the level of earnings inequality is comparable, but much less in Finland, Norway and Den- mark, where labor market outcomes are not as polarized. In this relative, intergenerational sense, earnings mobility is some- thing that citizens of all the rich countries value. It speaks for equal- ity of opportunity, and the notion that children can grow up to become all that they can be. Talents and energies, not the happenstance of birth, ultimately determine life prospects.

Systems play a major role too

And while intergenerational earnings mobility is not the result of any one public policy, cultural value or labor market institution, the nature and quality of schooling certainly play a central role in offering both an escalator to the top for those from disadvantaged backgrounds, and a trampoline that preserves the status of the advantaged. Affordable, high-quality and accessible schooling from the early years onward is surely the most significant gateway to higher incomes for children born to lower-income parents. But, at the same time, an education system with early tracking, varying quality and selective access preserves existing socioeconomic inequalities. It is no surprise that earnings mobility across the generations varies to such a significant degree across the OECD countries: these countries have very different education systems that are associated with differences in education mobility. In the UK, a child with university-educated parents is virtually as- sured not to be a high school dropout. Every extra year of parental schooling is associated on average with six tenths of an extra year for the child. But in Finland, Norway and Denmark, the association

between schooling levels across the generations is barely noticeable. The OECD has gone so far as to state that “the United States is one of only three OECD countries that on average spend less on students from disadvantaged backgrounds than on other students.” Education

is the key to one’s earnings prospects. This is all the more true in an

era of increased globalization and technological change. Those with the right skills have managed to ride this wave of change that has

affected all of the rich countries. As a result, income gaps have grown within countries, making it all the more important for children to have

a good start in life. The best-educated parents have more resources

and incentives to invest in the future prospects of their children. But

where inequality has grown the most, education mobility is the lowest,

has grown the most, education mobility is the lowest, Miles Corak is a full professor at

Miles Corak is a full professor at the University of Ottawa, working on social mobility, inequality and social policy in the rich countries. You can learn more about his research at milescorak.com or on Twitter@MilesCorak.

GLOBAL INVESTOR 2.13

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Collingwood in East Whitechapel district. has Estate, a distinctly multi London’s home to It many
Collingwood
in East
Whitechapel
district.
has Estate,
a
distinctly
multi London’s
home to It many
new
immigrants
and asylum
seekers.
Photo: Stuart Franklin/Magnum Photos

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GLOBAL INVESTOR 2.13 — 39 MOBILITY POLICY M a n a g i n g migration

MOBILITY POLICY

GLOBAL INVESTOR 2.13 — 39 MOBILITY POLICY M a n a g i n g migration

Managing

migration

Around the world, nations are only too aware of the strategic importance of labor mobility, as well as its benefits and the obstacles to achieving it. Reliance on migrants, both skilled and unskilled, is a complex proposition in the context of fragile domestic economies, no matter how sensible it seems. Martina Lubyová reviews some of the major policy trends in managing migration and their implications.

TEXT Martina Lubyová, director, Institute of Forecasting, Slovak Academy of Sciences, Bratislava

Immigration policies run in cycles. In the 19th century and early 20th century, the USA generally encouraged immigration, not least to settle the West and to build the railroads, but became more selective after 1920. Similarly, during the UK’s period of rapid expansion during the 1950s and 1960s, New Commonwealth immigrants from metal workers to doctors could enter and stay in the country at will until the Commonwealth Immigrants Act of 1962 ushered in an era of ever greater restriction. Today, as labor becomes increasingly mobile, most national immigration policies are geared toward managing migrant flows with the primary goal of securing economic growth. The OECD’s International Migration Outlook 2013 observes that, in recent years, migration policies have tended to follow broader labor market (and, to a lesser extent, demographic) objectives. Since the 1990s, policies on both sides of the Atlantic have been tested by economic booms and busts, new patterns of movement, post-9/11 concerns about terrorism and recently the Arab Spring. Many countries are currently in the process of fundamentally revising immigration legislation in response to these developments. When a domestic population is aging, declining or inactive – here, the European Union, the USA and Russia are prominent examples – bringing in foreign workers provides much-needed hands. Govern- ments everywhere aspire in particular to attract skilled labor to en- hance productivity. Two major policies employed by governments to attract skilled labor are points-based systems and quotas. For ex- ample, a special skilled-worker visa program created in 1990 called H-1B is credited with fueling the information technology boom in the

USA. The flip side of government strategizing is the needs and ambi- tions of individuals. Naturally, mass migration flows are also a per- petual feature of armed conflicts and humanitarian crises worldwide. But, according to the UN Population Fund, fueled by globalization, economic migrants are the world’s fastest-growing group of migrants.

Policies track the labor market

of the recession, with a tendency toward greater stringency. In Australia, Canada and the UK, for example, recruitment procedures for skilled migrants have been made more selective. The UK especially, where net migration (the difference between immigration and emigration) peaked in 2010 at 252,000, has increased funds requirements for all migrants and restricted work placements and permit duration for stu- dents. In the USA, an effort to overhaul the country’s immigration rules – including cutting red tape for employers and easing the path to citizenship for America’s 11 million undocumented immigrants – has, of this writing, stalled in the House of Representatives. To address issues related to the EU’s labor shortages and aging population, in 2009 the European Parliament passed the so-called Blue Card Directive, which aims to fast-track and harmonize the procurement of work permits for highly skilled non-EU citizens. Nei- ther a points-based nor a quota system, Blue Cards are contracts of limited duration, though they can be extended. Not all EU states have implemented the Directive, though those that have include Ger- many, the Slovak Republic and Hungary, which are all moving to

>

GLOBAL INVESTOR 2.13

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Photos: Patrick Zachmann/Magnum Photos

Home may be where the heart is, but for one family it’s a long way from where the work is

GUIZHOU

is, but for one family it’s a long way from where the work is GUIZHOU CHINA
CHINA SHANGHAI GUIZHOU PROVINCE 1,850 KM
CHINA
SHANGHAI
GUIZHOU
PROVINCE
1,850 KM
is, but for one family it’s a long way from where the work is GUIZHOU CHINA
is, but for one family it’s a long way from where the work is GUIZHOU CHINA
is, but for one family it’s a long way from where the work is GUIZHOU CHINA

GLOBAL INVESTOR 2.13

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SHANGHAI

GLOBAL INVESTOR 2.13 — 41 SHANGHAI The divided family Zhu Qi Yong and his wife Wang
GLOBAL INVESTOR 2.13 — 41 SHANGHAI The divided family Zhu Qi Yong and his wife Wang
GLOBAL INVESTOR 2.13 — 41 SHANGHAI The divided family Zhu Qi Yong and his wife Wang
GLOBAL INVESTOR 2.13 — 41 SHANGHAI The divided family Zhu Qi Yong and his wife Wang

The divided family Zhu Qi Yong and his wife Wang Gui Qin are migrant workers living in the poor area of Pudong in Shanghai – 1,850 kilometers separate them from their children, who live with their grandparents in their native village Xin Zhou Zen in Guizhou Province. To provide for their family, they cook in their tiny apartment for other migrant workers laboring on big construction sites. They deliver the meals directly to the construction site. Their two sons, seven-year-old Zhu Hai Xing and five-year-old Zhu Hai Nan, see their parents just once a year when they return home for two weeks during the Chinese Spring Festival.

GLOBAL INVESTOR 2.13

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“Most national immigration policies are geared toward managing migrant goal of securing economic growth.”

attract new skilled migrants. Indeed, the German government an- nounced in July 2013 that it had already issued 8,879 cards. Not all migration takes place between nations. Especially in large, emerging market countries where the level of local development dictates job opportunities and needs, policies reflect the efforts of governments to direct the flow of labor from region to region. In China, for example, the “hukou” (household registration) system per- sists as a means of pumping low-cost rural labor into the country’s booming urban economies. However, securing the social rights of migrant workers and their integration remains a challenge. Ongoing talk of reform has as of yet produced no concrete results. In India, the Mahatma Gandhi National Rural Employment Guarantee Act, passed in 2005, is intended in part to stem “distress” migration to cities by promising 100 days of minimum wage employment to a third of India’s rural households.

Mitigating social pressures relating to migration

Whatever its impulse or manifestation, labor migration entails benefits as well as costs for the receiving and sending countries (see the article by Ian Goldin in this issue). As a result, the national migration policies of developed countries are often governed by their integration agendas. Although these agendas differ, the Scandinavian countries represent one distinct group that generally offers open, publicly sup- ported and relatively generous schemes aimed at integrating foreign residents into their societies. The United Kingdom, the Netherlands, Japan and the USA, in contrast, opt for more restrictive schemes characterized by limited migrant entitlements and a shift of the costs and responsibility for integration to migrants themselves. So, too, does Russia, whose economy depends on migrant work- ers. Most immigrants come from the former Soviet republics, which have a visa-free travel regime with the Russian Federation. Yet the majority of immigrants must have a work permit, for which there is a quota. Many migrants thus end up in the shadow economy. In 2010 the Russian authorities introduced so-called patents for illegal migrant workers who work for private households, primarily as gardeners, drivers, cooks and housemaids. While the purchase of a patent grants

legal residence and working status, it does not provide access to social benefits or insurance. Owing to the dire state of their economies, countries such as Spain, Greece and Portugal have reduced their budgets for measures aimed at promoting labor market integration of migrants. At the same time, in 2011 and 2012, Spain enacted new measures aimed at providing vocational training to the unemployed who had lost their benefits, not explicitly for, but including migrants. Greece lowered the number of proof-of-work days required for permit renewal from 200 to 120 per year, and extended voting rights to migrants. In the face of a con- tinuing weak labor market, Portugal’s new National Integration Plan promotes rights and training for immigrants. In 2011, Denmark reversed its decade-long trend toward stricter immigration laws. Among other things, the government eased family reunification rules. Moreover, changes to the Immigration Act of 1999 now entitle immigrants to social assistance from the moment they arrive in Denmark, and discourage residential segregation. An initia- tive titled “We Need Everyone,” rolled out in 2012, targets immigrants struggling to find a job due to personal or social problems. Today, migration policies are a tool for addressing the economic and social challenges of the globalizing world. Developed countries attract migrants to boost economic growth or to mitigate the con- sequences of population aging and decline. Developing countries that cannot generate sufficient job opportunities use emigration as a valve for excess labor or as a source of remittances. While today migration policies are primarily governed by immediate economic concerns, their long-term consequences will mainly concern the social sphere. Successful integration of foreign populations and building inclusive multicultural societies should thus be a priority of

multicultural societies should thus be a priority of is Director of the Institute of Forecast- and

is Director of the Institute of Forecast- and Associated Fellow at CERGE-EI in Prague. She completed her PhD at CERGE-EI in 2002 and worked at the International Labor Organization’s Sub-regional and Central Asia. She is a co-author of the OECD’s International Migration Outlook 2013.

GLOBAL INVESTOR 2.13

43

n-Friedrichshain, S- n-Ostkreuz concourse. To cater for the the new growing number of upgrading its
n-Friedrichshain,
S-
n-Ostkreuz
concourse.
To cater for the
the new
growing
number
of
upgrading
its current infrastructure.
Photo: Caro/Muhs/Keystone

NORTHEAST

ASIA

> 75% 50–75% 0–50% Percentage of population living in urban areas exceeding 100,000 people 2030
> 75%
50–75%
0–50%
Percentage of population living in urban
areas exceeding 100,000 people
2030 — AN URBAN WORLD?
Chapter IV
THE FUTURE
OF MOBILITY
By 2030, 92% of French, 91% of Brazilians
and 87% of Americans will live in urban
areas. The corresponding figures in China
and India will only reach 62% and 40%
respectively.
Source: UNICEF
Global mobility will continue to rise in the coming decades,
creating millions of jobs and generating more air passenger
traffic. More people will also move to urban areas.
New mobility models needed
page 46
How ideas spread
page 50
The China
travel surge
page 52
USA = 1,139 KM
USA
332M URBAN POPULATION
87% URBAN
EMPLOYMENT GROWTH IN THE T&T SECTOR
MEXICO
105M URBAN

The global travel and tourism (T&T) sector today employs nearly 100 million people, representing 3% of all employment. When indirect jobs are taken into account, the industry contributes to around 1 in 11 jobs. These figures are likely to rise further, with approximately 66 million direct jobs set to be created worldwide by 2022, with Asia benefiting most.

POPULATION

83% URBAN

Regional contribution of the global travel and tourism sector’s total employment growth between 2012 and 2022, in thousands of jobs

SOUTHEAST 7,348 ASIA 23,947 289 OCEANIA 4,513 SUB-SAHARAN AFRICA NORTH AFRICA 1,689 6,580 OTHER 9,820
SOUTHEAST
7,348
ASIA
23,947
289
OCEANIA
4,513
SUB-SAHARAN
AFRICA
NORTH AFRICA
1,689
6,580
OTHER
9,820
SOUTH ASIA
MIDDLE EAST
1,413
CARIBBEAN
465
LATIN
AMERICA
4,513
NORTH
4,709
AMERICA
2,437
EUROPE

Source: Oxford Economics

BRAZIL

198M URBAN

POPULATION

91% URBAN

Oxford Economics BRAZIL 198M URBAN POPULATION 91% URBAN Countries forecast to have the most developed high-speed

Countries forecast to have the most developed high-speed train lines in 2025

HIGH-SPEED TRAIN LINES

China, Japan and Spain have the densest high-speed rail networks in use today – lines where trains can travel at more than 250 kilometers per hour. In 2025, the number of high-speed lines is forecast to have more than doubled worldwide to 51,677 kilometers.

Worldwide high-speed train lines in 2013, in kilometers

IN OPERATION = 21,365 km UNDER CONSTRUCTION = 13,964 km PLANNED = 16,347 km FORECAST TO BE OPERATIONAL IN

2025 = 51,677 km

Source: UIC

EVOLUTION OF AIR PASSENGER TRAFFIC FLOWS BETWEEN MAJOR DESTINATIONS World air passenger traffic is forecast
EVOLUTION OF AIR PASSENGER TRAFFIC FLOWS BETWEEN MAJOR DESTINATIONS
World air passenger traffic is forecast to annually grow by 5% between 2011 and 2031, with the greatest
increase in air passenger flows to take place within South Asia, as well as between South Asia and Southeast
Asia during these two decades.
Source: ICAST, India
PORTUGAL = 1,006 KM
SOUTH ASIAN FLOW
SOUTHEAST ASIAN FLOW
MIDDLE EAST FLOW
SPAIN = 5,525 KM
in South Asia
524%
in Southeast Asia
334%
from Africa
285%
from Southeast Asia
417%
from China
281%
FRANCE = 5,200 KM
from Europe
320%
from Africa
285%
SOUTH AMERICAN FLOW
GERMANY = 2,257 KM
from Middle East
306%
in South America
280%
ITALY = 1,318 KM
SWEDEN = 750 KM
CHINESE FLOW
TURKEY = 2,805 KM
in China
281%
RUSSIA
99M URBAN
POPULATION
77% URBAN
FRANCE
61M URBAN
POPULATION
TURKEY
92% URBAN
JAPAN
70M URBAN
CHINA
POPULATION
86M URBAN

NIGERIA

144M URBAN

POPULATION

64% URBAN

78% URBAN

IRAN

72M URBAN

POPULATION

80% URBAN

905M URBAN POPULATION 62% URBAN INDIA PHILIPPINES 73M URBAN POPULATION 58% URBAN
905M URBAN POPULATION
62% URBAN
INDIA
PHILIPPINES
73M URBAN
POPULATION
58% URBAN

PAKISTAN

121M URBAN

POPULATION

46% URBAN

590M URBAN POPULATION 40% URBAN

POPULATION

73% URBAN

JAPAN = 3,622 KM CHINA = 22,619 KM
JAPAN = 3,622 KM
CHINA = 22,619 KM

INDONESIA

146M URBAN

POPULATION

54% URBAN

INTERNATIONAL TOURISM BY REGION OF DESTINATION

In 2012, international tourist arrivals exceeded the 1-billion mark globally for the first time ever, up from 940 million in 2010. Europe will remain the most visited region over the next decades, though Asia Pacific will be catching up.

International tourist arrivals received (in million)

AFRICA

MIDDLE EAST

AMERICAS

ASIA PACIFIC

EUROPE

475.3

2010 2030 50.3 134 60.9 149 149.7 248 204
2010
2030
50.3
134
60.9
149
149.7
248
204

535

475.3 2010 2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6%
475.3 2010 2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6%
475.3 2010 2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6%
475.3 2010 2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6%
 

7.4%

8.2%

13.7%

29.6%

744

41.1%

Source: UNWTO

2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6% 744 41.1%
2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6% 744 41.1%
2030 50.3 134 60.9 149 149.7 248 204 535   7.4% 8.2% 13.7% 29.6% 744 41.1%

GLOBAL INVESTOR 2.13

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GLOBAL INVESTOR 2.13 — 46 URBAN CRAWL new mobility models needed The appeal of cities is

URBAN CRAWL

GLOBAL INVESTOR 2.13 — 46 URBAN CRAWL new mobility models needed The appeal of cities is

new

mobility

models

needed

The appeal of cities is unstoppable, and half the world’s population now lives in urban surroundings. Traffic in some cities regularly slows to a crawl, while noise and air pollution reduce the quality of life. With more and more people crowding themselves into a limited space, existing road and rail links are impeding the expansion of capacities. The situation calls for new solutions.

TEXT Thomas Rühl, Head of Swiss Regional Research, and Andrea Schnell, Research Analyst, Credit Suisse

GLOBAL INVESTOR 2.13

47

Developing into an industrial center has transformed Shenzhen into China’s most densely populated city. The number of private cars has risen from 1 million to 2.25 million in the last six years alone. According to the IBM Commuter Pain Index, only Mexico City is less commuter-friendly. The young Asian metropolis is a good example of the main problem currently afflicting large cities: jobs in the services sector are primarily being created in the center and at transportation hubs, while housing is largely provided in the surrounding agglom- eration. The capacities of the transportation infrastructure are unable to keep pace with the enormous growth of the population and com- muter numbers so that traffic congestion and delays are the order of the day. Alongside the urban sprawl an “urban crawl” is emerging as commuters and goods move at a snail’s pace. Cities as melting pots of ideas and places for the efficient exchange of knowledge are thus forfeiting their economic strength, while emis- sions, air pollution, noise and accidents reduce the quality of life of the inhabitants. Time losses throw a monkey wrench into the works of cities and impede economic growth. According to Texas A & M, the average commuter in Washington D.C. loses 67 hours a year sitting in traffic jams, with corresponding setbacks in terms of recreation, consumption and working time. Few cities were laid out for major growth at the outset. New York City is an exception: the Commissioner’s Plan of 1811 gave Manhattan its characteristic street pattern – the vision- ary basis for subsequent growth. Cities with medieval structures – such as the large European cities – were never planned for any similar type of growth. Capacity expansions are considerably more difficult owing to the lack of space.

The “smart” city

The example of Masdar City in Abu Dhabi is an attempt to plan a climate-neutral and mobility-enhanced city in the open countryside. As well as the revolutionary supply of energy from renewable sources, the city was originally planned to be completely car-free. Mobility was to be ensured largely through public transportation. However, the introduction of personal driverless “podcars” has now been dismissed and replaced by electric vehicles. This way, the different mobility needs of the 50,000 or so planned inhabitants and around 60,000 addi- tional commuters are to be met. The approach adopted by Masdar City serves to illustrate both the possibilities and technical and finan- cial limitations of mobility planning. The ideal planned city has a secure, reliable, low-emission and comfortable transportation system for passengers and goods, offer- ing maximum efficiency. Infrastructure and land use planning need to be designed in a manner that enables the city to grow further without resulting in congestion. Most global metropolises are con- fronted with significantly more complex challenges than Masdar City:

major adjustments to the transportation networks are impossible or enormously expensive. The most promising enhancement options are described in the adjacent boxes.

Road to the smart city is a bumpy one

Investments in transportation systems have extremely long-term re- turns. The risks of opting for the wrong technology are illustrated by examples such as the failed “future technology” of monorail. Various cities such as Sydney and Seattle introduced this technology, but owing to the high investment costs, monorail has been unable to achieve major success as a mass means of transportation. Differ- ent incentives for governments, businesses and the scientific

>

NEW AVENUES: A MOVE IN THE RIGHT DIRECTION

scientific > NEW AVENUES: A MOVE IN THE RIGHT DIRECTION TRAFFIC REDUCTION WITH INCENTIVES AND TECHNICAL

TRAFFIC REDUCTION WITH INCENTIVES AND TECHNICAL SOLUTIONS

Modern ICT solutions allow people to work anywhere. Home offices and decentralized, company-independent shared desks in residential areas help reduce commuting. For production enterprises, the campus model offers homes for employees close to the production sites.

TECHNICAL MOBILITY MANAGEMENToffers homes for employees close to the production sites. Adaptive control elements (traffic lights, speed limit

Adaptive control elements (traffic lights, speed limit signs, lane signs, adaptive public transportation connections and information apps for passengers, e.g. Hot Stop.com) can enhance the capacity and reliability of existing road, bus and rail links. Commuters should be able to plan in detail the best possible modal split of transportation means (car, train, bike, foot) depending on the current traffic situation. Indicators at bus stops and on mobile phones enable travelers to react to delays and connection breakdowns. The Future Urban Mobility Project in Singapore, an example of an integrated mobility manage- ment project being implemented in cooperation with the Massachusetts Institute of Technology, is based on real- time data and a profound understanding of traffic flows.

time data and a profound understanding of traffic flows. ECONOMIC MOBILITY MANAGEMENT The road pricing system

ECONOMIC MOBILITY MANAGEMENT

The road pricing system in Singapore and carpool lanes are successful examples of incentive mechanisms to make roads more efficient for all users. The sharing economy trend has fostered the emergence of new business models such as the Mobility car-sharing system in Switzerland, Barclays Cycle Hire in London and Zimride in San Francisco. Real-time ridesharing or taxi-sharing based on mobile phone apps transforms private mobility into ad hoc public transport models. Data about disruption is shared by users with other road users via apps such as Waze.

shared by users with other road users via apps such as Waze. TECHNICAL INNOVATIONS The latest

TECHNICAL INNOVATIONS

The latest developments in IT, sensor and communication technology mean that new solutions may soon become reality: interacting vehicles can form trainsover longer distances, thereby making road traffic more efficient and environmentally friendly. Another step is the driver- less car (e.g. from Google) that allows the driver to sleep or work during the journey. As the vehicle parks by itself, parking spaces can be some distance from the user’s destination, thereby significantly enhancing the flexibility of cities in terms of spatial planning.

the flexibility of cities in terms of spatial planning. NEW PUBLIC TRANSPORTATION SYSTEMS The efficiency of

NEW PUBLIC TRANSPORTATION SYSTEMS

The efficiency of trains can be massively enhanced if they no longer have to stop. Priestmangoode design consul- tancy in London proposes a system that allows trams to be connected to the side of non-stop high-speed trains and thereby simultaneously combine the role of platform and local distribution. Further ideas are innovative rail systems such as the proposed Hyperloop between Los Angeles and

San Francisco, a linear-induction-powered train-in-a-tube.

GLOBAL INVESTOR 2.13

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

community are exacerbating the problem of selecting a technology. Furthermore, the Google driverless car serves to exemplify the inno- vation-hampering impact of regulations and insurance issues:

California had to carry out legal changes prior to the first road test. The legal consequences in the event of an accident have not been clarified: Is it the passenger who is liable or the car manufacturer? We therefore think that innovative technologies will prevail more among users (smart vehicles) than among infrastructures (smart roads). Since the origins of civilization, cities have decisively shaped history. Mobility and the exchange of ideas are the crucial benefits of cities and key to the competition for attracting businesses. Cities that tackle the “urban crawl” will thrive. Those unable to adapt their mobil-

crawl” will thrive. Those unable to adapt their mobil- Andrea Schnell joined Credit Suisse in 2012
crawl” will thrive. Those unable to adapt their mobil- Andrea Schnell joined Credit Suisse in 2012

Andrea Schnell joined Credit Suisse in 2012 as an economist focusing on the Swiss economy, particularly locational quality and public - Thomas Rühl joined Credit Suisse in 2005 as an economist responsible and tax competition, he has been a consultant for several Swiss can-

competition, he has been a consultant for several Swiss can- 1 mile Ring Roads of the

1 mile

Ring Roads of the World

The graphic on the left is a composite image consisting of stacked layers, all in the same scale, representing the ring roads surrounding some 27 international cities. Houston, Texas, has the largest such system, with Beijing, China, coming in at number two. This award- winning image, titled Ring Roads of the World, was originally created by the Rice School of Architecture, located in Houston, Texas.

Source: Thumb Projects

SHAREWAY 2030
SHAREWAY 2030

GLOBAL INVESTOR 2.13