by Kislaya Prasad
Director, Center for International Business Education and Research
Have you had emerging markets on your mind? You probably should. The facts cannot fail to impress – persistently high growth rates, multi-fold increases in per capita incomes, and hundreds of millions of people lifted out of poverty over the last decade. Yet the numbers do not give the full picture. We find in countries like Brazil, China and India widespread optimism about the future and excitement about the possibilities. It is the kind of mindset that leads people to build great things. The absolute scale of the transformation occurring is striking. We are talking about billions of newly confident, innovative, and increasingly assertive people around the globe. Ignorance of, or complacency about, this phenomenon is not a luxury we can afford.
A great danger is from notions that are out of date. For instance, that China is all about low-cost manufacturing, that India is just call centers, or that after the effects of the financial crisis of 2008 have passed thing will be the way they were – with the US at the center of the economic firmament. Harvard historian Niall Ferguson goes so far as to liken our current moment to the one before the fall of great empires. While I disagree with him on this particular, I do believe that the rise of new economic powers, such Brazil, China, and India, has been the defining economic event of our lifetime, in the category of things that change the course of human history. US policymakers are no longer just focused on economic relations with Europe and Japan, and are as likely to be found in Beijing, New Delhi or Sao Paulo. American businesses are already busy coming to terms with the new reality, formulating their “emerging markets strategy.” In conversations with students in our own and other business schools about these topics, I sometimes pose the same question – What is your emerging markets strategy? It is hard to think of a career path that could be untouched by these new developments. What capabilities will be needed? What must students do to prepare themselves?
To make sense of what this means for the US, its businesses, and its students, the Smith School CIBER is launching its Emerging Markets Forum. This year’s theme is: The Rise of New Economic Powers and America’s Future. The opening keynote address for the conference is to be delivered by Rebecca Blank, Acting Deputy Secretary in the US Department of Commerce. After that we will hear from a CEO Panel comprised of Peter Bowe (President of Ellicott Dredges), Susan Ganz (CEO of Lion Brothers) and William Hutton (President of Titan Steel). We will get their perspective on the phenomenon of the rise of new powers and explore how the events discussed above figure into the strategies of their companies.
People occasionally suggest that the rise of new powers must come at the expense of the US. The closing of the gap between our countries will certainly affect relative living standards – but there is no obvious cause for worry in that. In fact, a rise in living standards elsewhere is probably a great opportunity for some US firms. So, our intention is to examine the proposition that the rise of new economic powers signals the decline of the West. This will be the topic of discussion for a very distinguished panel to be moderated by Steven Pearlstein of the Washington Post. Other members of the panel are Arvind Panagariya (the Jagdish Bhagati Professor of Indian Political Economy at Columbia University and author of India: The Emerging Giant), John Haltiwanger (University Professor at the University of Maryland), and Walter Bastian (Deputy Assistant Secretary for the Western Hemisphere at the U.S. Department of Commerce).
The luncheon keynote speaker will be Kemal Dervis (Brookings). Mr. Dervis was formerly the head of UNDP, and also Minister of Economic Affairs and the Treasury of Turkey. As part of the government in Turkey he was the architect for its economic reforms and created the blueprint that in some ways is being followed even today – which makes him one of the causes for the rise of this particular rising economic power. Incidentally, it is important to remember that the rise of China, India, and others all began with crucial market-based reforms. These days, we are watching history being made in the Middle East and Mr. Dervis is uniquely positioned to put the events (so critical to the economies of the region and the world) into perspective for us.
We count, with some pride, on our ability to innovate. And indeed, the US is still the best bet as a source for radically new knowledge. Advances in science and technology that will transform our lives in the future – whether in genomics, nanotechnology, or robotics – are still more likely to come from the US. But there are interesting trends worth watching. IBM, GE, and many other companies that are fundamentally reliant on new science are setting up labs in emerging markets. To some extent this is to be expected and is motivated by the need to create new products based on better local knowledge of the growth markets of the future. More disturbingly, George Buckley, CEO of 3M pointed in a recent interview to the decline in numbers of students with advanced degrees in science and engineering in the U.S. For a while now, a significant proportion of US science Ph.D. students have been foreign born. But now, as the quality of opportunities in other countries improves, such students are increasingly to be found elsewhere. At least in the case of 3M, research has followed the talent. To examine this trend (and others) we have organized a panel entitled The Evolving Innovation Landscape. The panel will be moderated by Anil Gupta of the Smith School, and includes Manish Gupta (Director of IBM Research – India).
The third keynote of the day is by Tarun Khanna (Harvard Business School). As an author of two books that are essential reading on emerging markets (Billions of Entrepreneurs and, with K. Palepu, Winning in Emerging Markets) Mr. Khanna is among the foremost authorities on the subject. He is also an advisor to some of the world’s leading corporations and his insights on what it takes to succeed in emerging markets are bound to be invaluable.
Our forum will conclude with a panel on finance in emerging markets. This has been something of a “hot topic” for a while now, as investors have sought out high performing companies listed on exchanges in emerging markets. However, engagement with these economies requires insight into forces that propel them. We have organized a panel precisely to this end. Lemma Senbet of the Smith School will moderate the discussion. His own topic for the day will be African finance where he will dispel commonly held myths, and introduce the audience to current realities. Mr. Senbet will be joined by other distinguished speakers – Stijn Claessens of the International Monetary Fund and George Allayannis from the University of Virginia.
If you are interested in participating in the forum, do join us on April 29, 2011. Registration details can be found at the CIBER website (www.rhsmith.umd.edu/ciber) or the dedicated conference website (www.rhsmith.umd.edu/EmergingMarkets). A highly subsidized conference fee has been arranged for Smith School students – but it requires registering by April 18.
I will pen my thoughts on the day’s proceedings in early May. I hope to see you at the forum.