Global Themes

On Globalization & Venture Capital

Finding hidden gems…

Nandini Lakshman has written a nice article in BusinessWeek on how VCs in India are broadening their scope and looking at non-obvious opportunities: “India Rides the VC Wave

Some excerpts:

“The fishermen from the Indian village of Chidambaram live a hard life. They sleep most of the day, then spend the night out on the water. For light during those dark hours, they have long depended on wobbly kerosene lamps that were easily blown out or, worse, toppled by the wind, risking deadly fires on their boats.

But these days, the kerosene lamps have been replaced with MightyLights, $50 solar-powered fixtures. “I save 100 rupees [$2.50] a month on kerosene alone,” says K Kanimuri, a fisherman’s wife, who also uses the MightyLight in her makeshift kitchen. With her savings, she now makes and sells candles…

MightyLight is the brainchild of New Delhi-based Cosmos Ignite Innovations, a Stanford University-incubated startup by Matthew Scott and Amit Chugh that aims to provide simple products for the world’s poorest people. And Cosmos got its start with backing from Vinod Khosla, a veteran Silicon Valley venture capitalist. Now Cosmos is in talks with other groups, including London-based 3i Group (TIGRF) and eBay (EBAY) founder Pierre Omidyar, for a second round of funding. “For us, it’s not just the light, but using a sustainable model to affect social change,” says Scott, chief executive of Cosmos.

…”The base of the pyramid is often ignored, but offers a tremendous opportunity,” says Katie Hill, the India representative of Acumen Fund, an $8 million fund backed by the Cisco Systems (CSCO) Foundation and the Rockefeller Foundation. Acumen has put $1.5 million into Ziqitza, a Mumbai-based ambulance company that offers deep discounts on its service for residents of the city’s vast slums. Shafi Matther, the founder of Ziqitza, says the funds will be used to stretch the company’s ambulance fleet of two dozen vehicles to 70 in the next two years, and roll out service across India. It is already operational in the south Indian state of Kerala.

…Or take IT-rural, set up by a group of software engineers from the south Indian state of Tamil Nadu. A clutch of U.S.-based VCs are circling the startup technology venture, which develops solutions for rural India. The company doesn’t just provide a bunch of computers and conduct basic-training classes, but has a Web site to educate farmers, giving them information about crop patterns, nature of soil, crop diseases, and remedies. IT-rural also has established backward and forward linkages, from buying the seeds to branding and retailing products.”

I am hoping to meet some of these guys during one of my future visits.

July 4th, 2007 Posted by | Development Issues, Emerging Markets, India | 2 comments

What might stall the “Great Chinese Growth Engine”?

chatham-house-logo.jpg        A few weeks ago, I attended a fascinating talk at Chatham House by Professor Wing Thye Woo who teaches Economics at the University of California on “The Real Challenges to China’s Continued High Growth”

He identified three important factors which might lead to the “crash of a speeding car” aka the “Great Chinese Growth Engine”:

  • Hardware failure: “right tire burst” = collapse of a crucial economic mechanism
  • Software failure: “fight within car” = social disorder
  • Power supply failure: “no petrol” = limits from ecological barrier or external sanctions

He also cited several interesting statistics in his presentation of which the two below particularly stood out for me:

  1. “Social Disorder”: 1994 had 10,000 mass incidents involving 730,000 persons? in 2004 the number had gone up to 74,000 mass incidents involving 3.7 million people.
  2. China’s GINI coefficient has almost doubled from .24 in ’78 to .47 in 2005

The China Policy Institute, which made it all happen, wrote its own report on the talk which can be accessed here.  The report nicely summarised the key points. I would recommend it and the slides to everyone who is watching China and its impact on the global economy.

A few excerpts:

“…China had enjoyed the highest sustained economic growth rate of any country in recorded history, he said, and it was probable that this high growth model would succeed.

But it was important to examine the factors most likely to disrupt the high growth rate from continuing…

…Professor Woo said that perhaps the greatest challenge to China’s continued high growth in China would be future global disputes over resources and the environment, following what he called the unravelling of the global consensus for free trade in the United States, which was making the atmosphere ripe for protectionism.

As China and India moved up the value chain in manufacturing complexity, he said, Western countries were being forced to make painful adjustments as more and more jobs were lost. At the same time they would be faced with demands to help pay for the environmental improvements needed in countries like China and India to curb carbon dioxide emissions, he said.

…The best way to reduce CO2 emissions was to ensure that the new power generation capacity installed in China and India made use of modern, clean coal technology, he said, but this would mean that the richer countries would have to offer to pay for this in order to enjoy the benefits.

This made the atmosphere also ripe for what he called a coming global clash over the “Global Commons” not just air but also water as well. Asia, he said, faced a looming water crisis as China made plans to divert the flow of water to rivers such as the Bramaputra and the Mekong that flowed into India and Southeast Asia…”

June 24th, 2007 Posted by | China, Development Issues, Economics, Emerging Markets, Globalization | 3 comments

India & China: so different, yet so alike

In its latest “Index of Failed States“, Foreign Policy magazine has ranked India (at # 110) way ahead of China (and Russia – both at #62) in terms of stability while Pakistan jostles for a position in the “Top 10” (at # 12) with North Korea (at # 13) – both nuclear armed for good measure.

and yet the report describes China in words that could have almost been written for India:

“…the growing divide between urban and rural, as well as continued protests in the countryside, reveals pockets of frailty that the central govenment is only just beginning to address”.

rankings-up-fs2007.gif For the curious amongst you, the top 3 places in the Index go to Sudan, Iraq and Somalia.

Related posts:

Why India will* overtake China – II

China, India and the “3D Advantage”

India, China and the next decade…

Of Googlies*, Cricket, India and China

.

June 21st, 2007 Posted by | China, Development Issues, Emerging Markets, Globalization, India | 2 comments

The Gospel according to Goldman Sachs

My good friend Tosh (author of “The Rising Elephant“) sent me one of his recent articles last week titled, “Eye On The Tigers” which makes the point that putting the all the BRIC countries in one basket may not only be unwieldy but also confusing and possibly inconsistent.

brics-report-pic.jpg  Excerpts:

The BRICs report published in 2003 by Goldman Sachs – which foresaw the rise of Brazil, Russia, India and China as global economc powerhouses, has acquired the aura of a Delphic Oracle.

Nevertheless, it remains confusing with regard to some key assumptions and conclusions, particularly for policymakers.

The first problem is the heterogeneousness of the BRIC membership. Demographically, Brazil and Russia have a combined population of just 330 million – against 2.4 billion for India and China.

Russia, by many accounts still a nuclear-armed superpower, is essentially an exporter of com m odities to the West and of arms to China and India – which, in some cases, its own armed forces cannot afford.

Russia is also ageing fast: 15 percent of its population is over 65 years old,against a mere 5 percent in India.

For its part, Brazil’s growth is three to four times lower, and its income distribution far more skewered, than India and China.

Indeed, the lack of a meaningful middle class is one reason for Brazil’s stagnation, while its presence in India underpins the surprising spurt in its GDP growth.

More perplexing is Goldman Sachs’s faith in the three-fold gap between Chinese and Indian GDP lasting for the next 25 years.

India has been far more efficient than China in moving up the global value chain.

Its telecoms market is now the w orld’s fastest grow ing.Outbound Indian acquisitions, ahead of China in both quality and scale, are another example.

… All this may be overlooked.

What cannot is the report’s unquestioning faith in the continuity of the current global order.

To show precedents for the BRICs, the Goldm an Sachs team turn to Japan and Germany’s rapid growth after World War II.  Such straight-line insight may well apply to Japan and Germany, or Brazil and Russia…

To imagine this is true for India and China, inhabited by a third of the w orld’s population (and sometime soon, half its workforce), is curious.

…Devoid of the yardstick of the dollar,  things look quite different . Both within the BRICs,and for the world outside.

For in purchasing power terms, China’s econom y is over tw ice the size of India’s,  while India’s is larger than those of Brazil and Russia combined.

More dramatic is the fact that the Indian and Chinese econom ies are together already equivalent to those of the U S or the EU.

*****

I would enourage you to read the article in full – especially if you have anything to do with policy-making in Europe.

June 6th, 2007 Posted by | China, Emerging Markets, Globalization, India | 2 comments

Smoke and Mirrors

In the latest issue of TIME, Bryan Walsh has written a fairly balanced piece on carbon emissions – which unfortunately is marred by a (deliberately?) provocative headline, “The Third World Smoke Alarm” (Interestingly, the European edition of the magazine has dropped the “Third World” prefix and has printed the article simply titled “Smoke Alarm”).

It was the sub-heading though that first caught my eye. It read:  

“To stop climate change, developing nations must wake up and smell the carbon”…I wish I could have added …”and developed nations must share the burden”.

I have written on this issue before  and it is interesting to observe how the blame surreptitiously gets shifted to the developing nations (e.g. the alarmist title – “Third World” Smoke Alarm….surely, if it is an alarm, it is probably a “Global” Smoke Alarm?).

*** Some excerpts below ***

“…Once home to some of the most extensive rain forests in the world, Indonesia is now losing trees at a faster rate than any other nation, to flames but also to rampant logging. …Indonesia’s rapid deforestation is the main reason why this country of 245 million is the third biggest carbon emitter in the world after the U.S. and China.

But as in other developing countries, the Indonesian government says it needs to focus on economic growth to raise its people out of poverty—and that likely means that trees will be cut, cars will be added and carbon emissions will only go up.

…Drawing on the work of thousands of scientists vetted by officials from over 100 countries, the IPCC reported that future carbon emissions could be controlled using current technology like nuclear or renewable energy—and that it could be done without bankrupting the global economy. “Measures to reduce emissions can, in the main, be achieved at starkly low costs, especially when compared with the costs of inaction,” said Achim Steiner, executive director of the United Nations Environment Programme (UNEP)

…As economic growth shifts to the developing world—especially Asia—so will future carbon emissions.

Whether the world can effectively combat climate change will be determined by countries like Indonesia and India—and particularly China, which could pass the U.S. as the world’s top carbon emitter any day.

…But if developing countries choose to ignore global warming, even the most radical actions out of the developed world could be rendered meaningless.

…Because developing nations have emphasized that they can’t afford to jeopardize the pace of economic growth for the sake of the environment, the only climate-change solutions they’re likely to accept will be ones that come cheap.

Fortunately the IPCC says that’s possible—the new report concludes that the cost of stabilizing global carbon emissions by 2030 could require as little as one-tenth of a percentage point per year of global growth through the end of the century.

Those costs will have to be borne by someone, and the developing nations will rightly push for North America and Europe to pick up the check.Expect that argument to be renewed at the next major U.N. climate-change meeting in Bali, Indonesia, at the end of the year.

Developing nations make the point that they’re not responsible for the vast majority of carbon dioxide hanging around in the atmosphere—which was put there by Western countries during their own development over the past 150 years.

They argue that their own per capita-emissions rates are still far lower than those of the West, and that, therefore, climate change isn’t their responsibility.

But future global warming will hinge on how we deal with future carbon emissions—most of which will come from developing Asia. The center of gravity of climate-change politics has moved to China, India and Indonesia. Their decisions will shape the world we live in.”

*** End of Excerpts *** 

Find the article in full here.

Finally, here’s a useful chart showing world carbon dioxide emissions by country between 1990 – 2035.

CO2 Emissions by Country

May 23rd, 2007 Posted by | Development Issues, Emerging Markets | 25 comments

Globalization: A Lost Opportunity?

Under a nicely provocative headline titled “UK businesses signing their death warrants with their ignorance“, the chilli recently quoted from Grant Thornton’s International Business Report, while commenting on UK SMEs and globalization.

Amongst other things, it noted that:

“…less than half of UK businesses (46 percent) believed that globalization presented an opportunity to their country” compared to “82 percent of Indian businesses who believed that globalization presented a significant opportunity for their country…”

The story also mentioned: “UK business owners felt that (the economic expansion of the BRIC countries) over the past few years (has) had very little impact on their own companies”

A few other startling findings:

  • 79% of UK businesses are ignoring opportunities to import from China
  • 90% have no plans to export to India and
  • 87% have no plans to export to China

…all of which suggests to me a great opportunity (and a market) waiting to be tapped.

May 10th, 2007 Posted by | China, Emerging Markets, Europe and Asia, Globalization, India | 4 comments

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