Clean growth means facilitating economic development and improving standards of living, while protecting natural resources and ecosystems on which our well-being relies. The transition to a low-carbon economy requires mobilising investment and innovation to develop opportunities for inclusive and sustainable growth.
Prior to the Covid-19 pandemic, consumer goods accounted for a quarter of the world’s trade in goods, representing US$4.8trn in 2019.1 In 2020 private consumption declined by nearly 11% in the UK and Italy, 6-7% in Germany, France and Japan and 4% and 3% in the US and China respectively.2 Some goods sectors suffered more than others. Travel, entertainment and hospitality were some of the hardest hit, while others, like electronics, saw demand increase as remote working became widespread. The pandemic has further accelerated several structural changes already underway. These include a rapid growth in e-commerce and digitalisation of global supply chains, an increased focus on sustainability, a move towards greater servicification and the reshaping of global value chains.
Pandemic shock: Change in private consumption during the Global recession (2009) and Covid-19 pandemic (2020) | Real annual change (%)
During the pandemic, consumers pivoted to digital channels, with 60% of consumers worldwide changing their shopping behaviors during the pandemic, most of whom intend to continue with their new behaviors.3 The migration from high street stores to e-commerce platforms has accelerated digitalisation, with businesses that had already invested in e-commerce coming out as chief beneficiaries. Amazon, for example, posted a 70% increase in earnings during the first nine months of 20204, with profits three times higher than 2019.5
The pandemic also highlighted the issue of resilience and sustainability of global supply chains. Multinational enterprises (MNEs) in 2020 slowly started to scale back their supply chains, considering the geopolitical and economic tensions between the US and China and the growing issue of sourcing from a single geography. Significant supply chain disruptions were faced by businesses during the pandemic, with one survey on supply chain executives in the food and consumer goods industries highlighting that at the height of the pandemic, 91% of respondents said they had problems with suppliers.6 These tensions are playing out in the context of rapidly changing geographical distribution of global trade patterns. In the decade since the 2008 financial crisis, Chinese share of global exports has increased to 17% (from 11.5%) and 13.4% of global imports (from 8.7%).7 The Asia-Pacific region is now largely expected to outgrow developed markets in consumer goods, accounting for up to 35% of the global industry share by 2022.8
The changing game of trade: The export volume of goods index rebased to 2010=100
The rise of digital and sustainable consumption poses significant opportunities and challenges for businesses in the consumer goods sector. The online retail market is forecast to double in size by 20259, with new or low frequency users expected to drive a 160% increase in e-commerce purchases over the coming years. Businesses are showing some strong interest in harnessing the trends of digitalization with 80% of executives in the industry specifically allocating investments to improve their e-commerce shopping platforms in 2021.10
Digital future: Share of on-line retail on total retail sales (%)Sustainability has also moved high in the consumer goods agenda, with more than half of consumers across all markets intending to purchase more sustainable products once the pandemic subsides.11Businesses are adapting to increase resilience and sustainability of their internal businesses and their supply chains. Advances in cloud software, blockchain, artificial intelligence (AI) and satellite technology can be harnessed to enable flexibility and resilience in supply chains.
1 UNCTAD. ‘Key statistics and trends in international trade 2020’ (internet). United Nations Conference on Trade and Development. 2021 (accessed 9.6.21). Available at: https://unctad.org/system/files/official-document/ditctab2020d4_en.pdf 2 Remes, J. Manyika, J et al. ‘The consumer demand recovery and lasting effects of COVID-19’ internet). McKinsey. 2021 (accessed 9.6.21). Available at: https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-consumer-demand-recovery-and-lasting-effects-of-covid-19 3 McKinsey. ‘Perspectives on retail and consumer goods’ (internet). McKinsey & Company, 2020 (accessed 7.6.21). Available at:https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/Perspectives%20on%20retail%20and%20consumer%20goods%20Number%208/Perspectives -on-Retail-and-Consumer-Goods_Issue-8.pdf 4Takefman, B. ‘Amazon profits increased nearly 200% since start of Covid-19 pandemic’ (internet). ResearchFDI. 2021 (accessed 14.6.21). Available at: https://researchfdi.com/amazon-covid-19-pandemic-profits/ 5Sky News. ‘Amazon’s profits more than tripled in the first three months of 2021’ (internet). Sky. 2021. Accessed 14.6.21). Available at: https://news.sky.com/story/amazons-profits-more-than-tripled-in-the-firs... 6 Alicke, K. Gupta, R. Trautwein, V. ‘Resetting supply chains for the next normal’ (internet). McKinsey. 2020 (accessed 8.6.21). Available at: https://www.mckinsey.com/business-functions/operations/our-insights/resetting-supply-chains-for-the-next-normal 7 Eurostat. ‘World trade in goods’ (internet). Eurostat - statistics explained. 2020 (accessed 8.6.21). Available at:https://ec.europa.eu/eurostat/statisticsexplained/index.php?title=World_trade_in_goods#World_trade_in_goods:_developments_between_2008_a nd_201f 8 Accenture. ‘A new era of trade for consumer goods industry’ (internet). Accenture, 2020 (accessed 8.6.21). Available at: https://www.accenture.com/_acnmedia/pdf-73/accenture-new-era-of-trade-for-consumer-goods-industry.pdf 9 EIU. ‘Digital disruption: risks and opportunities in the shift to online’ (internet). Economist Intelligence Unit. 2020 (accessed 14.6.21). Available at: https://www.eiu.com/n/digital-disruption-risks-and-opportunities-in-the-shift-to-online/ 10 Deloitte. ‘2021 consumer products industry outlook: No-regret moves in the face of uncertainty’ (internet). Deloitte. 2021 (accessed 14.6.21). Available at: https://www2.deloitte.com/us/en/pages/consumer-business/articles/consumer-products-industry-outlook.html 11 YouGov. ‘International FMCG/CPG report 2021’ (internet). YouGov. 2021 (accessed 14.6.21). Available at: https://db42aa43a2d5ed566294-81964d36a501d7a15be4d8350b0feec4.ssl.cf3.rackcdn.com/YouGov-International-FMCG-Report- 2021%20(2).pdf
The pandemic has brought sections of the creative industry to a halt, but also accelerated structural changes within the industry, such as the transition towards digital platforms and a greater role for individual ‘content creators’.
The pandemic has impacted the creative industries asymmetrically. Segments dependent on live audiences and cross-border travel, such as performing arts, theatre and cinema, were hard hit by social distances measures, while digital creative industries boomed. Europe’s performing arts sector lost 90% of its revenue, while its music sector registered a 76% decline.3 The sector also suffered from low state welfare provisions, as most creative industry workers are self-employed or freelancers and therefore not always eligible for job protection policies put in place. In Europe 32% of cultural sector workers are self-employed and lack job protection, a total of 7.3m jobs in the sector at risk, representing 3.7% of total EU employment.4 The pandemic has also accelerated the digital transition of the sector, highlighting the centrality of digital technology for economic resilience. Quickened innovation in digitalisation and technology, as live performance shut down has given rise to streaming platform as well as unique digital creative assets built on the blockchain, like non-fungible tokens (NFTs). Growth has been notable in digital publishing, with the UK seeing a 37% increase in audio downloads, and a 24% increase in digital book downloads.5 The shift to online sales favored players that already had an established online presence, as well as those who swiftly adapted. This is seen to favor the advertising sector, which is forecasted to a strong recovery in 2021 in the UK, increasing to £29bn in 2022.6 This is largely attributed to the digital shift.
Annual revenue of global entertainment market (US$ bn)The digital transition shift has given birth to new producer tools, new distribution and dissemination platforms and the rise of the ‘creator economy’. These have profound implications for the sector’s growth, development and international trade. The music streaming and video on-demand revolution has established a new market and increased competitive tensions between players. On-demand video grew by 31% in 2020. There are now 1.1bn online video subscribers online, up 26% from 2019.7 The rise of the ’creator economy’, aided by the emergence of a growing range of tools allowing the production of high-quality content with minimal financial requirements, has also given birth to new forms of revenue in the creator space. One fifth of companies surveyed in a 2019 poll spend at least half their marketing budget on influencers.8, is a niche market that is growing rapidly. The rise of TikTok, for example, has generated US$20bn in sales from China in 2020 and forecasted global sales of US$40bn in 2021.9
Crucially, as a highly globalised, employment-intensive sector with a significant growth potential, creative industries are an important part of rapid and inclusive post-pandemic recovery. One study estimated that creative industries contributed 4.5% to US GDP – more than construction, transportation, mining or agriculture – and can significantly improve, not merely reflect, the health of the economy following a downturn.10 The creative sector offers economic diversification and can rapidly recover from a downturn, without being impacted by other slow growing sectors, or external volatility. As recognised by the UN, the creative economy has the potential to support developing and transition economies in diversifying production and exports and to deliver sustainable and inclusive development.11
1 UNCTAD, 2021: https://unctad.org/news/creative-economy-have-its-year-sun-2021#:~:text=UNCTAD%20has%20tracked%20trade%20 in,prospects%20look%20bleak%2C%E2%80%9D%20Ms. 2 UNESCO, 2018: https://en.unesco.org/creativity/sites/creativity/files/global_report_fact_sheet_en.pdf 3 The Guardian, 2020: https://www.theguardian.com/technology/2021/mar/12/non-fungible-tokens-revolutionising-art-world-theft 4 European Commission, 2020: https://ec.europa.eu/jrc/en/news/expert-investigating-pandemic-s-impact-europe-s-cultural-activities 5 Publishing in 2020 6 City AM, 2021: https://www.cityam.com/uk-advertising-sector-on-track-for-strongest-global-recovery/ 7 The Motion Picture Association, 2021: https://www.motionpictures.org/wp-content/uploads/2021/03/MPA-2020-THEME-Report.pdf 8 Wired, 2020: https://www.wired.com/story/influencer-economy-hurtles-first-recession/ 9 Bloomberg, 2021: https://www.bloomberg.com/news/articles/2021-06-10/tiktok-is-jacking-up-prices-as-it-builds-its-ad-business 10 Douglas Noonan: https://nasaa-arts.org/wp-content/uploads/2021/01/ArtsCultureContribEconRecovery-KeyFindings.pdf 11 UNCTAD, 2021: https://unctad.org/news/creative-economy-have-its-year-sun-2021
Alongside professional services, it plays a pivotal role in the modern economy and international trade flows. The Covid-19 pandemic significantly disrupted the industry that was already being reshaped by the effects of the global financial crisis, sustainability drive and digital innovation. Digital transformation, changing customer preferences and regulatory pressures, are also challenging existing business models in financial and related professional services.
Despite entering the pandemic more resilient than it has been prior to the previous crisis, and stronger than expected performance in 2021, the global banking sector may register losses as a result of the pandemic over the next years. These will show in the form of credit losses, with defaults expected to soar as state support is withdrawn. One estimate forecast the industry’s loss in revenue at US$3.7trn over the next five years.1 Moreover, the uneven nature of the post-pandemic recovery will hit some regions and sectors harder than others. There is limited scope for wider margins in developed markets, with interest rates low and financial services utilisation high. In developed economies there is much greater space to reach new customers, despite the increase in credit risks.2 Digital technologies are restructuring the way financial services are provided, the competition dynamics and how the customers interact with the industry. The rise of financial technology (fintech), blockchain and artificial intelligence companies, are threatening traditional providers of financial services through increased competition. Challenger neobanks (digital-only providers) and telecom providers are gradually increasing their share in the market, both in terms of processes and services offered to customers. Traditional providers that struggle to shift activities to digital channels risk losing market share and the ability to reach new customers. In 2018 fintech companies already accounted for 38% of unsecured personal lending in the US, while they are “economically relevant” in SME financing in China, the US and the UK, according the Bank for International Settlements (BIS).3
Fintech boom: Number of UK Fintech companies (rebased at year 2000), 2000-2020Digital currencies have increasingly become the focus in central banks around the world amid growing government, business and consumer interest. A Central Bank Digital Currency (CBDC) would allow central banks to issue electronic money available to all households and businesses, allowing them to make payments in CBDC. A report from the Bank for International Settlements highlighted that 28% of 50 central banks surveyed were looking into CBDC interoperability.4 Of the major world economies, China is thought to be the most advanced CBDC testing, with the e-CNY digital yuan expected to launch in 2022.5 CBDCs could bring wider access, stronger governance and privacy standards to digital payments systems, currently dominated by cryptocurrencies such as Bitcoin.
Going digital: Willingness of central Banks to adopt range of approaches to interoperabilty of Central Bank Digital Currency (CBDCs) (%), 2021There is also growing consensus that financial services actors need to upgrade their agenda towards climate finance, as net zero cannot be achieved without the funding needed to mitigate the physical risks of the impact of climate change. Global climate financing was estimated to have reached up to US$620 in 2019, the bulk of which through debt issuance. Financing a transition to a climate-resilient economy will require much greater investment than is currently being committed, and failure to provide it will result in even more investment for climate adaptation and mitigation in the longer term. Estimates suggest that US$100-150trn will be needed to reach the 1.5-degree target by 2050.6
Climate finance growth: Total global climate finance flows (US$bn), 2012-2019The growing prominence of institutional and private investment in climate financing has prompted regulatory efforts to drive climate related activities. Regulation is responding to market developments with new tools, such as green bonds, and shaping the disclosure requirements through the launch of the Taskforce on Climate-related Financial Disclosures. However, more needs to be done to incentivise climate financing and the financial services industry has a vital role in facilitating the tools and mechanisms that will help address climate change.
1 McKinsey. ‘Interim Results 2021’. 2021. https://www.mckinsey.com/industries/financial-services/our-insights/global-banking-annual-review 2 The Economist Intelligence Unit (EIU).’Financial Services Global Outlook. 2021 3 Frost, J. ‘The economic forces driving fintech adoption across countries’. Bank for International settlements. https://www.bis.org/publ/work838.pdf, p.2 4 Auer, R et al. ‘CBDCs beyond borders: results from a survey of central banks’. Bank for International Settlements. 2021.https://www.bis.org/publ/bppdf/bispap116.htm 5 Lim, M. ‘What lies ahead for CBDCs, Bitcoin and other digital currencies?’. Fintech News. 2021.https://www.fintechnews.org/what-lies-ahead-for-cbdcs-bitcoin-and-other-digital-currencies/ 6 GFMA. ‘GFMA and BCG Report on Climate Finance Markets and the Real Economy‘. Global Financial Markets Association. 2020.https://www.gfma.org/policies-resources/gfma-and-bcg-report-on-climate-finance-markets-and-the-real-economy/
The global supply chains for food, agricultural products and technology experienced an unprecedented shock due to the pandemic. Despite the disruption trade in foodstuff remained remarkably resilient, highlighting the essential role of food supply in times of crisis. Nevertheless, global food systems are undergoing a structural transformation that is necessary, not only to feed the world’s growing population, but also to prevent damaging impacts of climate change and environmental degradation.
The pandemic has brought sections of the creative industry to a halt, but also accelerated structural changes within the industry, such as the transition towards digital platforms and a greater role for individual ‘content creators’.
The pandemic has impacted the creative industries asymmetrically. Segments dependent on live audiences and cross-border travel, such as performing arts, theatre and cinema, were hard hit by social distances measures, while digital creative industries boomed. Europe’s performing arts sector lost 90% of its revenue, while its music sector registered a 76% decline.3 The sector also suffered from low state welfare provisions, as most creative industry workers are self-employed or freelancers and therefore not always eligible for job protection policies put in place. In Europe 32% of cultural sector workers are self-employed and lack job protection, a total of 7.3m jobs in the sector at risk, representing 3.7% of total EU employment.4 The pandemic has also accelerated the digital transition of the sector, highlighting the centrality of digital technology for economic resilience. Quickened innovation in digitalisation and technology, as live performance shut down has given rise to streaming platform as well as unique digital creative assets built on the blockchain, like non-fungible tokens (NFTs). Growth has been notable in digital publishing, with the UK seeing a 37% increase in audio downloads, and a 24% increase in digital book downloads.5 The shift to online sales favored players that already had an established online presence, as well as those who swiftly adapted. This is seen to favor the advertising sector, which is forecasted to a strong recovery in 2021 in the UK, increasing to £29bn in 2022.6 This is largely attributed to the digital shift.
Annual revenue of global entertainment market (US$ bn)The digital transition shift has given birth to new producer tools, new distribution and dissemination platforms and the rise of the ‘creator economy’. These have profound implications for the sector’s growth, development and international trade. The music streaming and video on-demand revolution has established a new market and increased competitive tensions between players. On-demand video grew by 31% in 2020. There are now 1.1bn online video subscribers online, up 26% from 2019.7 The rise of the ’creator economy’, aided by the emergence of a growing range of tools allowing the production of high-quality content with minimal financial requirements, has also given birth to new forms of revenue in the creator space. One fifth of companies surveyed in a 2019 poll spend at least half their marketing budget on influencers.8, is a niche market that is growing rapidly. The rise of TikTok, for example, has generated US$20bn in sales from China in 2020 and forecasted global sales of US$40bn in 2021.9
Crucially, as a highly globalised, employment-intensive sector with a significant growth potential, creative industries are an important part of rapid and inclusive post-pandemic recovery. One study estimated that creative industries contributed 4.5% to US GDP – more than construction, transportation, mining or agriculture – and can significantly improve, not merely reflect, the health of the economy following a downturn.10 The creative sector offers economic diversification and can rapidly recover from a downturn, without being impacted by other slow growing sectors, or external volatility. As recognised by the UN, the creative economy has the potential to support developing and transition economies in diversifying production and exports and to deliver sustainable and inclusive development.11
1 UNCTAD, 2021: https://unctad.org/news/creative-economy-have-its-year-sun-2021#:~:text=UNCTAD%20has%20tracked%20trade%20 in,prospects%20look%20bleak%2C%E2%80%9D%20Ms. 2 UNESCO, 2018: https://en.unesco.org/creativity/sites/creativity/files/global_report_fact_sheet_en.pdf 3 The Guardian, 2020: https://www.theguardian.com/technology/2021/mar/12/non-fungible-tokens-revolutionising-art-world-theft 4 European Commission, 2020: https://ec.europa.eu/jrc/en/news/expert-investigating-pandemic-s-impact-europe-s-cultural-activities 5 Publishing in 2020 6 City AM, 2021: https://www.cityam.com/uk-advertising-sector-on-track-for-strongest-global-recovery/ 7 The Motion Picture Association, 2021: https://www.motionpictures.org/wp-content/uploads/2021/03/MPA-2020-THEME-Report.pdf 8 Wired, 2020: https://www.wired.com/story/influencer-economy-hurtles-first-recession/ 9 Bloomberg, 2021: https://www.bloomberg.com/news/articles/2021-06-10/tiktok-is-jacking-up-prices-as-it-builds-its-ad-business 10 Douglas Noonan: https://nasaa-arts.org/wp-content/uploads/2021/01/ArtsCultureContribEconRecovery-KeyFindings.pdf 11 UNCTAD, 2021: https://unctad.org/news/creative-economy-have-its-year-sun-2021
Alongside professional services, it plays a pivotal role in the modern economy and international trade flows. The Covid-19 pandemic significantly disrupted the industry that was already being reshaped by the effects of the global financial crisis, sustainability drive and digital innovation. Digital transformation, changing customer preferences and regulatory pressures, are also challenging existing business models in financial and related professional services.
Despite entering the pandemic more resilient than it has been prior to the previous crisis, and stronger than expected performance in 2021, the global banking sector may register losses as a result of the pandemic over the next years. These will show in the form of credit losses, with defaults expected to soar as state support is withdrawn. One estimate forecast the industry’s loss in revenue at US$3.7trn over the next five years.1 Moreover, the uneven nature of the post-pandemic recovery will hit some regions and sectors harder than others. There is limited scope for wider margins in developed markets, with interest rates low and financial services utilisation high. In developed economies there is much greater space to reach new customers, despite the increase in credit risks.2 Digital technologies are restructuring the way financial services are provided, the competition dynamics and how the customers interact with the industry. The rise of financial technology (fintech), blockchain and artificial intelligence companies, are threatening traditional providers of financial services through increased competition. Challenger neobanks (digital-only providers) and telecom providers are gradually increasing their share in the market, both in terms of processes and services offered to customers. Traditional providers that struggle to shift activities to digital channels risk losing market share and the ability to reach new customers. In 2018 fintech companies already accounted for 38% of unsecured personal lending in the US, while they are “economically relevant” in SME financing in China, the US and the UK, according the Bank for International Settlements (BIS).3
Fintech boom: Number of UK Fintech companies (rebased at year 2000), 2000-2020Digital currencies have increasingly become the focus in central banks around the world amid growing government, business and consumer interest. A Central Bank Digital Currency (CBDC) would allow central banks to issue electronic money available to all households and businesses, allowing them to make payments in CBDC. A report from the Bank for International Settlements highlighted that 28% of 50 central banks surveyed were looking into CBDC interoperability.4 Of the major world economies, China is thought to be the most advanced CBDC testing, with the e-CNY digital yuan expected to launch in 2022.5 CBDCs could bring wider access, stronger governance and privacy standards to digital payments systems, currently dominated by cryptocurrencies such as Bitcoin.
Going digital: Willingness of central Banks to adopt range of approaches to interoperabilty of Central Bank Digital Currency (CBDCs) (%), 2021There is also growing consensus that financial services actors need to upgrade their agenda towards climate finance, as net zero cannot be achieved without the funding needed to mitigate the physical risks of the impact of climate change. Global climate financing was estimated to have reached up to US$620 in 2019, the bulk of which through debt issuance. Financing a transition to a climate-resilient economy will require much greater investment than is currently being committed, and failure to provide it will result in even more investment for climate adaptation and mitigation in the longer term. Estimates suggest that US$100-150trn will be needed to reach the 1.5-degree target by 2050.6
Climate finance growth: Total global climate finance flows (US$bn), 2012-2019The growing prominence of institutional and private investment in climate financing has prompted regulatory efforts to drive climate related activities. Regulation is responding to market developments with new tools, such as green bonds, and shaping the disclosure requirements through the launch of the Taskforce on Climate-related Financial Disclosures. However, more needs to be done to incentivise climate financing and the financial services industry has a vital role in facilitating the tools and mechanisms that will help address climate change.
1 McKinsey. ‘Interim Results 2021’. 2021. https://www.mckinsey.com/industries/financial-services/our-insights/global-banking-annual-review 2 The Economist Intelligence Unit (EIU).’Financial Services Global Outlook. 2021 3 Frost, J. ‘The economic forces driving fintech adoption across countries’. Bank for International settlements. https://www.bis.org/publ/work838.pdf, p.2 4 Auer, R et al. ‘CBDCs beyond borders: results from a survey of central banks’. Bank for International Settlements. 2021.https://www.bis.org/publ/bppdf/bispap116.htm 5 Lim, M. ‘What lies ahead for CBDCs, Bitcoin and other digital currencies?’. Fintech News. 2021.https://www.fintechnews.org/what-lies-ahead-for-cbdcs-bitcoin-and-other-digital-currencies/ 6 GFMA. ‘GFMA and BCG Report on Climate Finance Markets and the Real Economy‘. Global Financial Markets Association. 2020.https://www.gfma.org/policies-resources/gfma-and-bcg-report-on-climate-finance-markets-and-the-real-economy/
Whilst the immediate effects have been severe, the pandemic has further accelerated trends that are reshaping the global investment landscape, such as the push for digital, sustainable and resilient solutions in a world that has turned more fragmented. Estimates suggest that in 2020 global trade in goods fell by 8%, while foreign direct investment (FDI) flows fell by a record 35% to US£1trn, the lowest figure since 2005.1 2 The retraction in global cross-border investments was more severe in developed economies, where FDI inflows and outflows fell by almost 60%. On the other hand, developing economies saw FDI inflows and outflows fall by only 10% largely due to resilient flows in Asia, particularly in China and India.3
During the pandemic the internationalisation of major multinational enterprises (MNEs) stagnated, although the degree of this effect varied considerably across industries. The value of announced greenfield investment fell by 33% to a record low of US$564bn, cross border M&A investment fell by 6% to US$475bn while project finance deals registered a 42% decline to US$367bn in 2020.4 The UNCTAD forecasts suggest global FDI flows have recover some ground in 2021 and return to pre-pandemic levels (2019) in 2022. Developed economies are expected to drive the growth in FDI, particularly in M&A activity and public investment support. These measures will have a positive effect on infrastructure, green, and digital economy sectors.5
Over the past two decades, the increasing investment in services, enlarged pool of cross border investors and the focus on emerging technologies have shaped the global investment landscape. The gradual servicification of manufacturing and the rapid rise of global digital technology companies have driven an upwards trajectory for investment in services. Services accounted for 60% of announced greenfield projects and 71% of announced cross border M&A deals in 2020.6 The sources of the investment flows are also becoming more diversified, with the emerging markets accounting for almost one fifth of global M&A deals by value and almost half the total value of global greenfield and international project investment in 2020.7 State-owned investors (SOIs), including largely emerging-market-located sovereign wealth funds (SWFs) have also become prevalent in the investment landscape with a growing appetite for alternative asset classes and active investment strategies.
Changing guards: Top host economies by FDI inflows (2019-20)As the global economy recovers from the pandemic, major forces ranging from emerging technologies, investment policy sustainability and geopolitics will reshape the pattern of the global investment landscape. FDI regulations and policies, already gaining traction prior to the pandemic, have been deployed by national governments to address supply chain vulnerabilities and the risk of predatory takeovers of strategic sectors. The number of investment policy measures adopted in 2020 rose by 40% compared to 2019, with the ratio of restrictive policy measures to liberalisation measures increasing by 41%.8
GVCs will also adopt new modes of business operation to enhance resilience, flexibility and uncertainty of considering the current global business environment. This could involve elements of reshoring or regionalisation for businesses, while governments are expected to gear up efforts to increase sustainability of business operations through integration of environmental, social and governance standards into regulatory frameworks for foreign investments and capital markets. Geopolitics and the changing geography of global demand will impact the international investment as developing countries continue to deepen their participation in global investment flows and tension remains high in the rivalry between the US-China.9
Policies matter: Number of investment policy measures adopted globally between 2008-20201 “World trade primed for strong but uneven recovery after COVID-19 pandemic shock”; World Trade Organisation, press release (March 2021) 2 “World Investment Report 2021: Investing in Sustainable Recovery”; UNCTAD (June 2021). 3 Ibid. 4 Ibid. 5 Ibid. 6 “World Investment Report 2020: International Production Beyond the Pandemic”; UNCTAD (June 2020). 7 “World Investment Report 2021: Investing in Sustainable Recovery”; UNCTAD (June 2021) 8 Ibid. 9 “Globalization in transition: The future of trade and value chains”; McKinsey Global Institute (2019)
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors.
To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.
Executive summary
Sentiment on the economic promise of Africa seems to ebb and flow. African economic growth has been anaemic over the past decade, and the continent continues to grapple with fundamental challenges around improving transport infrastructure and electrification. Since the start of the covid-19 pandemic, some of these development priorities have been pushed further down the agenda.
The GCC’s pivot to Asia has yielded some strategic partnerships with the region’s giants, including China and India, but the relationship with the ASEAN countries remains underdeveloped. Imports from the ASEAN countries made up just 6% of the GCC’s total imports between 2016 and 2020. Although exports from the GCC to ASEAN have been on the rise, they mainly consist of crude oil and plastic polymers.
This research report highlights areas for deeper collaboration, particularly among ASEAN’s growth sectors of food and agriculture, e-commerce and fintech.
Key findings of the report:
The digital economy is going to drive growth in ASEAN’s key sectors. In our survey, executives in the following sectors were most optimistic about revenue expansion in 2022: transport and logistics (90%), agriculture and food (90%), retail and e-commerce (87%) and financial services and fintech (83%). The increasing use of digital platforms, from ridehailing and e-commerce apps to blockchain and robo-advisers in financial services, is expected to enhance efficiency and help companies deliver innovative services to businesses and consumers. A higher share of respondents expects a majority of their revenue to be secured through online channels in 2022 (67%) compared with 2019 (26%). The GCC and ASEAN regions already have a foundation for future collaboration. In ASEAN, GCC companies have invested in establishing oil refineries and petrochemical facilities but have also ventured into food, e-commerce and financial services. ASEAN companies are active in the GCC’s hospitality and food sectors but also have a small presence in financial services. Lessons learned from these endeavours could enable further expansion. There is scope for increasing trade in agricultural products. The GCC relies on the ASEAN region for just 7% of its total food and beverage imports. Given that ASEAN is known for its production of rice, soybeans and tropical fruits, among others, the GCC could explore a wider variety of agricultural products to import. Strengthening transport and logistics links as well as harmonising rules for halal products may enable greater trade in agriculture, food and beverages between the two regions. Knowledge sharing in key sectors can provide a framework for deeper collaboration. Regulators aiming to develop the fintech sector in the GCC could learn from progressive regulators in the ASEAN region such as Singapore, for example. Collaborating on the training of halal auditors could facilitate trade in a host of halal products from food to pharmaceuticals. Download Arabic Report
As Latin American countries navigate the post-pandemic economic recovery, they are discovering that there are fresh opportunities to seize and new relationships to forge. Companies in the region are riding the surge in commodity prices, which benefits their agricultural and metal exports, and are positioning themselves as the partner of choice for companies that are diversifying their supplier base for products ranging from medical devices to cosmetics.
In this report we examine the sectors poised for growth in Latin America (LatAm) and opportunities for engagement with international markets. To this end we are taking a closer look at the trade and investment relationship between LatAm and the Gulf Co-operation Council (GCC) to identify areas where the GCC can be a destination for LatAm products, a supplier for key industries, an investor for growing operations, and a knowledge partner for industry best practice.
Key findings of the report:
LatAm growth will come from sectors that require engagement with international markets. The highest shares of executives who expect revenue to expand in 2022 are in the healthcare industry and the food and agriculture sector (cited by 97% in each). This includes producers of medical equipment, pharmaceuticals (including vaccines) and a host of food products from coffee to poultry. These products are among the region’s key exports and will continue to rely on external demand for growth. The GCC and Latin America have a complementary but limited trade relationship. The GCC imports iron ore from LatAm for the production of aluminium, which it then exports to LatAm. LatAm imports fertiliser for its agricultural sector from the GCC, and the agricultural outputs are then exported to the GCC. However, trade levels are low. In 2020, imports from LatAm accounted for just 3.2% of the GCC’s total imports and 1.6% of LatAm’s total exports. LatAm executives are starting to turn to the GCC for investments. Just 5% of the executives we surveyed in 2021 were engaging with the GCC to secure investments, but 28% said they were interested in doing so in the future. Between 2016 and 2021 the GCC invested US$4bn in LatAm countries, 77% of which was sourced from the UAE, 22% from Saudi Arabia and 1% from Qatar. There is an untapped opportunity for knowledge exchange between the two regions. The GCC countries have successfully executed road, electricity and telecommunications infrastructure projects. LatAm is home to a rapidly expanding fintech industry and has an established agricultural sector. There is an opportunity for sharing best practice in sectors vital for growth. Download Arabic Report
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.
Three decades of globalisation brought about by the proliferation of free trade agreements, investment liberalisation, and enhanced logistics have facilitated the geographic diversification of supply chains away from domestic markets. From the 1980s to the financial crisis in 2008, supply chains fanned out across the world as companies sought lower-cost locations for the sourcing of inputs and production.
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.
EXECUTIVE SUMMARY
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors. To measure how nations are addressing the issue of illicit trade, the Transnational Alliance to Combat Illicit Trade (TRACIT) has commissioned The Economist Intelligence Unit to produce the Global Illicit Trade Environment Index, which evaluates 84 economies around the world on their structural capability to protect against illicit trade. The global index expands upon an Asia-specific version originally created by The Economist Intelligence Unit in 2016 to score 17 economies in Asia.
View the Interactive Index >> Download workbook
The GCC-LAC agricultural trading relationship has thus far been dominated by the GCC’s reliance on food imports, specifically meat, sugar, and cereals. Over the past two years, however, there has been a notable decline in the share of sugar imported from LAC, and 2017 saw the biggest importers in the GCC—Saudi Arabia and the UAE—impose a ban on Brazilian meat.
Market players on both sides of the aisle are keen to grow the relationship further, but there are hurdles to overcome. In this report, we explore in greater depth the challenges that agricultural exporters and importers in LAC and the GCC face. We consider both tariff and non-tariff barriers and assess key facets of the trading relationship including transport links, customs and certification, market information, and trade finance.
Key findings of the report:
GCC will need to continue to build partnerships to ensure a secure supply of food. Concerns over food security have meant that the GCC countries are exploring ways to produce more food locally. However, given the region’s climate and geology, food imports will remain an important component of the food supply. Strengthening partnerships with key partners such as those in LAC, from which it sourced 9% of its total agricultural imports in 2016, will be vital to food security in the region.
There is a wider range of products that the LAC countries can offer the GCC beyond meat, sugar and cereals. Providing more direct air links and driving efficiencies in shipping can reduce the time and cost of transporting food products. This will, in turn, create opportunities for LAC exporters to supply agricultural goods with a shorter shelf life or those that are currently too expensive to transport. Exporters cite examples such as berries and avocados.
The GCC can engage small and medium-sized producers that dominate the LAC agricultural sector by offering better trade financing options and connectivity. More direct air and sea links can reduce the cost of transporting food products, making it viable for smaller players to participate in agricultural trade. The existing trade financing options make it prohibitive for small and medium-sized players too. Exporters in LAC suggest that local governments and private companies in the GCC can offer distribution services with immediate payments to smaller suppliers at a discount.
Blockchain technology is poised to address key challenges market players face in agricultural trade. Through a combination of smart contracts and data captured through devices, blockchain technology can help to reduce paperwork, processing times and human error in import and export processes. It can improve transparency, as stakeholders can receive information on the state of goods and status of shipments in real time. Finally, it can help with food safety and quality management—monitoring humidity and temperature, for instance, along the supply chain can help to pinpoint batches that may be contaminated, minimising the need for a blanket ban on a product.