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.
La covid-19 a durement frappé l’économie de la RDC. Les ménages à faible revenu et les exclus financièrement sont ceux ayant le plus souffert. À la suite de la première vague de la pandémie, les deux tiers des ménages ont déclaré que leur revenu mensuel avait diminué. Les perturbations économiques se sont poursuivies jusqu'à la fin de 2020 : en décembre, 55% des ménages ont déclaré devoir réduire leur consommation de nourriture et d'eau pour faire face aux difficultés économiques.
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.
After decades of propelling global economic growth through the international flow of goods, services, people and ideas, globalisation is in crisis. Already under pressure from geopolitical tensions and the rise of populist politics, the covid-19 pandemic has caused even the most free-marketoriented economies to question their reliance on global supply chains and trumpet the value of self-sufficiency.
The Covid-19 pandemic is the most significant global disruption since World War II and the first truly global public health crisis in the modern era. Entire industries have ground to a halt; international travel has receded to its lowest level in 75 years; nearly all of the world’s leading economies are in recession; and at the time of publication, more than one million people have died from the virus and its complications. As the pandemic forces profound change in all aspects of society, technology is playing a starring role in enabling organisations to respond to disruption. Technological laggards have been exposed, and the most resilient organisations are those that had already embraced automation, cloud computing and collaboration platforms.
On the surface, digital transformations during the pandemic have resembled the advances of recent decades, characterised by a shift to new but proven and commercially available technologies. Many of these transformations seem predictable—or at the very least, intuitive. However, deeper analysis reveals that underlying innovation processes are changing, which has significant implications for the post-pandemic era. The public health crisis has motivated organisations to accelerate plans for technology deployment, governments to waive regulatory requirements, and consumers to accept new products and services.
This research is the product of interviews with over 30 industry experts regarding changes to innovation processes at their organisations; a scan of over 2,000 articles in technology media to identify leading, sector-specific innovations; and an assessment of innovation disruption, using a framework based on Everett Rogers’s theory of the diffusion of innovations.
The research programme focused on the underlying processes of innovation, as well as the environmental factors that facilitate innovation. As the Covid-19 pandemic continues to cause global disruption, an urgent motivation has emerged to address the current challenges and plan for a new world. This presents a valuable opportunity to observe how innovation processes are changing.
Overall Insights
Simple solutions are almost always preferred unless transformational plans are already under way. Observable success still matters, although it is increasingly industry-agnostic. Trials and product rollouts are being condensed—perhaps permanently.Healthcare
Disrupted access to physical health records has accelerated the digitisation of health data in hospitals and reduced organisational inertia in integrating complex systems. The rapid uptake of telehealth and remote care management has reduced the burden on on-site facilities. Remote care proliferation is accelerating artificial intelligence (AI) research. An emerging culture of collaboration and open data during the pandemic—and wider application of AI—has revolutionised research.Media
Media production has shifted to the cloud, and there has been an uptick in experimentation with emergent technology as news broadcasting and entertainment decentralise. While automation has increasingly been deployed to respond to the need for real-time information on the pandemic, there is a consensus that many existing news industry tasks cannot be automated.Education
Simple technologies, such as public broadcasting, have been adopted to address the gaps in access to digital infrastructure. The pandemic has helped to drive a change in attitudes in favour of using more, technology, but education remains a laggard relative to other industries.Transport
The urgency of the pandemic is providing use cases for autonomous vehicles that would not otherwise exist. The need to minimise contact has pushed the minority of digital holdouts to abandon outdated documentation practices in favour of modern platforms backed by cloud, automation and co-ordination technologies.Government Administration
Automation is being used to deal with the additional workload arising from the pandemic, but it is not taking over existing tasks. The pandemic is changing minds and culture in government, leading senior officials to embrace new technology and innovation to a greater extent.
In the summer of 2019 The Economist Intelligence Unit asked global institutional investors and asset owners which sectors in China they found most attractive. Technology was cited by 58%,1 making it the top answer above financial or healthcare services. Although trade tensions had started ramping up at that time, a majority of survey respondents still expected to boost exposure to China’s economy. Since then, US-China trade tensions have tightened into talk of “decoupling”, threatening to tear apart a relationship that has buoyed international stock markets for years. While the political effect is polarising and immediate implications for firms involved in global trade can be destabilising, the disputes bring a different balance of risk and reward from an investment perspective.
Made in China 2025
The story of China’s economic transformation into “the world’s factory” isn’t new or even finished yet. But the current chapter is about moving up the value chain. The “Made in China 2025” initiative identifies ten priority sectors with a range of plans and policies aimed at generating “innovation-driven development” and Chinese self-sufficiency in a variety of industries,2 such as artificial intelligence (AI), Internet of Things (IoT), biotech and semiconductors. Containing few hard targets, an overarching goal appears to be displacement of foreign technology in favour of Chinese versions—up to a 70% share for China’s domestic market.
“[China’s] strategy is not entirely different from that of South Korea or Japan earlier,” says Marcin Piatkowski, senior economist at the World Bank in Beijing. “But the process could be more transparent, especially in terms of who gets financial support. There are many sources of funds to support companies, but it’s sometimes difficult to know where it is all going. More than half of China’s research and development (R&D) spend is at the regional level.”
Calling “Made in China 2025” a blueprint for advancement or protectionism is a political decision; on a practical side, it’s likely to mean a shifting of corporate profits from west to east. BCG, a management consultancy, has developed several scenarios to measure impact. It reports: “Our model indicates that [supplier substitution] will deepen the revenue loss coming from the Chinese market to US semiconductor companies by an incremental 30% to 40%.” If US companies in that supply chain lose Chinese buyers it would hurt their profits considerably, but it could prove a boon to non-US firms.
“The example of the semiconductor industry shows the challenges China faces,” says Andrew Gilholm, principal and director of analysis at Control Risks, a consulting firm. “Even though it has made rapid progress—the pace of development is extraordinary—there is still a significant gap from here to where they want to be, where they don’t need imports. So while they are trying to bridge that gap, they can’t afford to scare off foreign investors or provoke export controls from the US because they are still vulnerable.”
China’s advantage?
With a massive domestic market, many Chinese companies have not had to look abroad for growth. The digital economy is a good example of where Chinese tech companies have rapidly leapfrogged foreign counterparts as they innovate in the local market. With the development of “super apps” and whole ecosystems of commerce contained in one platform, companies like Alibaba have flourished. It now has a 56% share of the Chinese e-commerce market— greater than Amazon’s share of the US market—and was easily able to fend off a local challenge from US rival eBay.3 So absolute was eBay’s defeat in China that typing the phrase “eBay in China” into Google’s search engine auto-completes with “failure”.
That dynamic has given rise to a global anxiety which has led China to tone down its “Made in China 2025” rhetoric but not its plans, according to Mr Gilholm. “They are doubling down on their industry level plans but pursuing them in a way that is less threatening,” he says. “However the sense of urgency to develop domestic capabilities has only increased, even more so in the past year with the sanctions and actions against Huawei, WeChat [from Tencent] and TikTok [from Bytedance]. It is full steam ahead, but repackaged.”
“Chinese companies have been able to build capacity and muscle owing to the size of the domestic market and the fact that they have been somewhat insulated from competitive pressures,” says Mr Piatkowski. “There are a couple of areas in which China is a global leader that might be less affected by geopolitical changes: the digital economy, logistics and medical equipment.”
For more on how China’s domestic healthcare sector is growing and creating investment opportunity, see The Economist Intelligence Unit article: “Healthy China 2030” policy could be a blueprint for investment opportunity.
Pursuing growth despite uncertainty
Chinese tech companies, of course, see a chance to benefit from decoupling. Chinese President Xi Jinping’s announcement of a “dual circulation” policy—making domestic consumption China’s economic growth engine and securing supply chains in critical industries—has raised domestic hope of government support, particularly for tech companies.4
That skewing of the playing field is putting off some foreign companies, but not all. China was the largest recipient of foreign direct investment (FDI) in Asia in 2019, with companies such as BASF, Volkswagen and Daimler (Germany), Exxon Mobil and Tesla (USA), and Toyota (Japan) remaining major investors.5 In mid-2020, about 15% of US companies operating in China told the US- China Business Council in a survey that they were moving at least part of their operations out of China, and 24% said they had reduced or stopped planned investments in the country (up from 19% in 2019). However, it also found that compared with 2019 more US companies now consider China a top strategic priority (16%) and top-five priority (83%).6 By August 2020 FDI into China had already climbed to US$89bn—a 2.6% year-on-year increase—and although trade clashes show no signs of dampening, August alone saw FDI jump by 18.7%7. So actions still speak louder than words; and labour costs—more so than trade or tech tensions—still appear to be the driver of any supply chain migration.
China’s growth potential is unparalleled and its economy remains one of the few that The Economist Intelligence Unit forecasts to show any GDP growth at all in 2020. Many Western firms, such as Schneider Electric, a European electronic components and systems manufacturer, have set up in China not just to supply global markets but to serve the local market under a “China for China” strategy. Unwinding such investments is much easier said than done.
Still, decoupling pressures may drive US firms to make political decisions rather than business ones. The US-China Business Council survey found 86% of US companies with business in China have been impacted by US- China trade tensions.8
The environment for foreign tech companies varies considerably by sector, according to Mr Gilholm. “For example, with semiconductors and other advanced parts like memory, companies like Intel and Toshiba are still operating in China,” he says. “There hasn’t been much of an exodus but it’s not paranoid to say that dominant foreign companies will only stay that way for as long as it takes China to catch up. China has been such a big part of companies’ global growth strategies it would take a lot for them to abandon the market, but they are hedging their bets and taming expectations.”
Chance for a reset?
Ahead of the US presidential election, the question is whether a change of administration would radically change this environment.
The Economist Intelligence Unit says China and the US have been on a collision course for the better part of a decade and there is little prospect of improved relations even if Joe Biden wins. However, the US handling of the conflict would look different. Under Mr Trump, foreign policy has been isolationist, withdrawing from multilateral bodies to remove any restraints on US power.9
“The election result won’t change plans,” Mr Gilholm says. “[Joe] Biden isn’t calling for going back to the pre-Trump status quo and the fundamentals that have been driving this for years, even before Trump, haven’t changed. But do expect a change in style. [US secretary of state] Mike Pompeo is using strong language, describing China as an existential threat, an enemy. That would go, as well as the use of executive orders, [if Mr Biden becomes president].”
Whether or not the US steps up pressure on China it’s still likely to pursue a self-sufficiency agenda, according to BCG models. Under the status quo, US firms in the semiconductor supply chain, for example, might see as much as a 30% drop in revenue in a case where Chinese buyers seek to diversify supply but not eliminate US sources. Under a model where China has to replace US suppliers, the drop could be 40%. Beneficiaries, in that case, would be companies in China, South Korea, Japan and Europe.10
The extent to which the US and China push decoupling will determine how technology develops around the world. Countries may be forced to choose which to work with exclusively, especially for critical infrastructure. Already pressure from the US has resulted in the UK government banning its mobile carriers from buying new Huawei 5G equipment after December 31st 2020 and forcing them to remove all Huawei 5G kit from their networks by 2027.11
Chinese tech companies may find it more difficult to work in the West, but they can still pursue global ambitions by offering financial or technical support to countries covered by China’s Belt and Road Initiative. The Economist Intelligence Unit forecasts that: “China and the US will increasingly exert their leverage over third parties to the extent that a neutral stance becomes economically prohibitive. A gradual bifurcation in the global economy would be a slow-moving trend initially, but its longer-term impact would be significant...trading blocs that are torn between the US and China would face significant political tensions.”12
Decoupling is not yet a foregone conclusion. FDI into China is still flowing and if the country does reduce dependence on foreign high- tech, as advocated by the “Made in China 2025” strategy, that still offers opportunity to international investors, especially the 58%13 who already marked Chinese tech as a top sector of interest a year ago.
The report was written by Monica Woodley and edited by Jason Wincuinas.
1. “The China position: Gauging institutional investor confidence”, The Economist Intelligence Unit, November 2019. https://eiuperspectives.economist. com/financial-services/china-position-gauging-institutional-investor-confidence 2. Elsa B Kania, “Made in China 2025, Explained”, The Diplomat, February 1st 2019. https://thediplomat.com/2019/02/made-in-china-2025-explained/ 3. “How competitive is China’s tech scene?”, FT, August 4, 2020 https://www.ft.com/content/7d862fb6-6c3a-45ad-a057-58c2122167b5 4. https://www.ft.com/content/943ea0db-d4e6-414c-b953-6081058d5f2f 5. "2020 World Investment Report”, UNCTAD, 2020 6. “Member Survey”, US-China Business Council, 2020. https://www.uschina.org/sites/default/files/uscbc_member_survey_2020.pdf 7. “China’s inbound foreign investment surges 18.7 per cent in August, as bank loans grow more than expected”, SCMP, September 11, 2020 https:// www.scmp.com/economy/china-economy/article/3101217/chinas-inbound-foreig... 8. "Member Survey”, US-China Business Council, 2020. https://www.uschina.org/sites/default/files/uscbc_member_survey_2020.pdf 9. “US-China relations under a Biden presidency”, The Economist Intelligence Unit, 2020. https://www.eiu.com/public/topical_report. aspx?campaignid=uschinarelations 10. Antonio Varas, Raj Varadarajan, “How Restrictions to Trade with China Could End US Leadership in Semiconductors”, BCG, March 2020. https:// www.bcg.com/publications/2020/restricting-trade-with-china-could-end-uni... 11. Leo Kelion, “Huawei 5G kit must be removed from UK by 2027”, BBC, July 14th 2020. https://www.bbc.co.uk/news/technology-53403793 12. The US-China trade war splits the global trade system, The Economist Intelligence Unit, 2020. https://gfs.eiu.com/Article. aspx?articleType=gr&articleId=3406 13. “The China position: Gauging institutional investor confidence”, The Economist Intelligence Unit, November 2019. https://eiuperspectives.economist. com/financial-services/china-position-gauging-institutional-investor-confidence 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.
In the summer of 2019 The Economist Intelligence Unit asked global institutional investors and asset owners which sectors in China they found most attractive. Technology was cited by 58%,1 making it the top answer above financial or healthcare services. Although trade tensions had started ramping up at that time, a majority of survey respondents still expected to boost exposure to China’s economy.
The China position: Gauging institutional investor confidence is an Economist Intelligence Unit report, comissioned by Invesco. It analyses results from a survey of 411 institutional investor and asset owner organisations (approximately 200 in Europe, Middle East and Africa, 100 in North America, and 100 from Asia-Pacific). The key findings of the survey are as follow:
A majority (nine in ten) of our survey respondents claim some level of dedicated exposure to China. Investments are growing; about half of respondents with dedicated China exposure report their investments have “risen significantly” in the past 12 months. Equities are the most-cited way organisations invest in China. Over 60% of respondents with dedicated China exposure report both equities and fixed income onshore holdings. Respondents cited improvements to their own China expertise as the top driver for dedicated investment exposure. Nearly four in ten respondents say environmental, social and governance (ESG) factors play a role in all of their investment decisions; fewer than three in ten say ESG is particularly important for China investments. Chinese asset classes in our survey could see increased investment from foreign organisations over the next 12 months, with respondents highlighting technology, financial services and “new economy” sectors as most attractive. Risk assessments are largely even across asset classes, but on a regional split respondents in APAC are more concerned than counterparts in North America or EMEA. Respondents are mixed on the impact of US-China trade tensions, with similar numbers expecting a positive or negative effect. But a majority of respondents report that their organisations expect to increase exposure over the next 12 months, regardless of outlook. About three-quarters of survey respondents say China’s economy will improve over the next 12 months; about two-thirds say the same for global economic conditions.Our thanks are due to the following individuals for their time and insights:
Jimmy Chang, chief investment strategist, Rockefeller Capital Management Mark Delaney, deputy chief executive and chief investment officer, Australian Super Kevin Wade, chief investment officer, Superannuation Arrangements of the University of London (SAUL)Download the report for more insights.
China has now emerged as the world’s largest economy by purchasing power parity and is a market that investors cannot ignore. To learn more about the confidence level of institutional investor and asset owner organisations in China and the opportunities and concerns over the next 12 months, click here to download the full 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.
The Cost of Silence: Cardiovascular disease in Asia is a report by The Economist Intelligence Unit and EIU Healthcare. It provides a study of the economic impact of CVD risk factors on the following Asian markets: China, Australia, Hong Kong, Japan, Singapore, South Korea, Taiwan and Thailand.
Specifically, the study captures the cost of ischaemic heart disease (IHD) and stroke. IHD, also called coronary heart disease (CHD) or coronary artery disease, is the term given to heart problems caused by narrowed heart (coronary) arteries that supply blood to the heart muscle, which can lead to stable angina, unstable angina, myocardial infarctions or heart attacks, and sudden cardiac death. Stroke is characterised by the sudden loss of blood circulation to an area of the brain due to blockage of brain vessels, or a haemorrhage or blood clot.
This study further combines an evidence review of existing research on CVDs and primary research in the form of expert interviews.
Key findings of the report are as follow:
The rising incidence of CVD poses a substantial challenge to Asia-Pacific markets The four main modifiable cardiovascular risk factors pose a communications challenge for governments and health agencies. Hypertension is the risk factor that contributes the highest cost. The costs of CVDs are not fixed. Greater awareness and policymaker attention can substantially reduce CVD costs as many obstacles and corresponding solutions have been identified as effective. Policy options for primary prevention include choice “nudges”. Effective secondary prevention can also significantly affect costs and outcomes.
The cost of inaction: Recognising the value at risk from climate change is a report by The Economist Intelligence Unit (The EIU). This research depicts the scope of assets at risk from climate change from the present to 2100. This innovative achievement draws on a modelling endeavour that combines The EIU’s long-term forecasts with a nuanced, integrated assessment model provided by Vivid Economics. The full methodology can be found in the appendix to this report which can be downloaded here for free. This white paper further discusses the possible consequences of climate change as well as how both investors and governments are measuring and responding to climate-related risks. The findings of this paper are based on detailed modelling, extensive desk research and interviews with a range of experts, conducted by The Economist Intelligence Unit.
To estimate the effect of climate change to 2100 on the changing stock of manageable financial assets, The Economist Intelligence Unit (The EIU) and Vivid Economics have used a leading, peer-reviewed forecasting model of the impact of climate change on the economy, the DICE (Dynamic Integrated Climate-Economy) model. DICE is one of a small number of integrated assessment models (IAMs) that have been built to estimate the economic cost of future climate change. These models link economic growth, greenhouse gas emissions, climate change and the damages from climate change back on the economy, and they do so in an integrated, consistent framework. They are typically built by adding a model of climate change to an existing framework for modelling the macroeconomy, with carbon emissions and climate damages providing the primary links between the two. DICE is the most popular of these models, having been used and cited in thousands of academic studies over nearly three decades.
The traditional purpose of IAMs has been to estimate the size of the climate change externality—the social cost of greenhouse gas emissions—in order to inform policymakers in setting emission targets or carbon prices. A famous example of such an exercise is the Stern Review, which estimated the present value of the future social costs of climate change to be equivalent to 5-20% of global GDP. The US Environmental Protection Agency has also recently used a suite of IAMs, including DICE, to determine the social costs of carbon for federal regulatory impact assessments. Since the value of financial assets is intrinsically linked to the performance of the economy, the innovation of this study is to use the DICE model to estimate the impact of climate change on financial assets instead.
This modelling recognises that, since the present value of a portfolio of equities should be the discounted cash flow of future dividends, then in the long run—ie, over the course of a century—dividends in a diversified portfolio should grow in line with GDP, as ultimately dividends are paid for from the output of the economy. In well-functioning financial markets the same relationship with GDP growth should hold for cash flows from other kinds of assets, such as bonds. This relationship may not be observed over a relatively long time period, even decades, owing to business cycles; for example, corporate profits are currently at historical highs, while GDP growth is low. However, on average, to 2100, this relationship can be expected to hold up. The DICE model is then used to forecast the effect of climate change on GDP, and in turn on cash flows from assets. The results are for total global assets as DICE is a globally aggregated model that does not allow explicit disaggregation by asset class or by region.
The need to get better value from healthcare investment has never been more important as ageing populations and increasing numbers of people with multiple chronic conditions force governments to make limited financial resources go further.
These pressures, along with a greater focus on patient-centred care, have raised the profile of VBHC, especially in European healthcare systems. Sweden, with its highly comprehensive and egalitarian healthcare system, has been a leader in implementing VBHC from the beginning, a fact that was underscored in a 2016 global assessment of VBHC published by The Economist Intelligence Unit.
This paper looks at the ways in which Sweden has implemented VBHC, the areas in which it has faced obstacles and the lessons that it can teach other countries and health systems looking to improve the value of their own healthcare investments.
Across the globe businesses in the travel and tourism sector have been left reeling from covid-19, and Australia is no exception. Tourism comprised 3.1% of the nation’s GDP—and 8.2% of export earnings—in 2018/2019, with an annual economic value of A$60.8b (US$40.2b).1 With planes grounded, tourist venues shuttered, cruise ships quarantined and all non-essential domestic and international travel banned since the end of March, it is difficult to identify an Australian economic sector more severely impacted by the pandemic.
Financing sustainability: How do investors and issuers in APAC's sustainable finance market view the present market opportunities and constraints?
To learn more:
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Financing sustainability: Asia Pacific embraces the ESG challenge is an Economist Intelligence Unit report, sponsored by Westpac. It explores the drivers of sustainable finance growth in Asia Pacific as well as the factors constraining it. The analysis is based on two parallel surveys—one of investors and one of issuers—conducted in September and October 2019.
If the countries of Asia Pacific are to limit the negative environmental effects of continued economic growth, and companies in the region are to mitigate their potential climate risks and make a positive business contribution through improving the environment and meeting the UN's Sustainable Development Goals (SDGs), large volumes of investment in sustainable projects and businesses need to be mobilised. A viable sustainable finance market is taking shape in the region to channel commercial investor funds, and both investors and issuers say they are achieving a financial benefit from their investment and financing activities. The market is still in the early stages of development, however, and must expand and mature to meet investor needs.
The chief constraint on sustainable finance growth in the region has been the limited supply of bankable sustainable projects. Our research suggests supply is increasing, but with investor demand continuing to grow apace, the gap will remain an obstacle in the short- to medium-term. Among the organisations in our issuer survey, only 7% have used sustainable finance instruments to fund projects. However, nearly nine in ten (87%) said they intend to do so in the next year, which should begin to bridge the gap between supply and demand.
Based on issuers’ stated intentions, investors will have a range of instruments to choose from, including green loans and bonds and sustainability loans and bonds. Large numbers of investors indicate that they intend to deploy a greater proportion of capital to these over the next three years.
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.China’s leaders have not yet declared an economic growth target for this year, nor have they announced a stimulus package to rival those of 2009, 2012 and 2016. What does this mean for China’s economic outlook?
It is well established that the modern CFO has a more strategic role to play in a business, but a clear action plan to achieve this is lacking. A key element of this is helping the business to deal with change. Some changes are planned: launching a new product or service, setting up operations in a new region or acquiring a competitor. Others may be unexpected: a major disruption to supply-chain operations, the emergence of new regulation and legal reporting requirements or the unpredictable impacts of global economic uncertainty.
Either way, when asked about the biggest challenges they face in executing their day-to-day activities, change is a recurring theme, according to a new survey of 800 CFOs and senior finance executives, conducted by The Economist Intelligence Unit. Managing unexpected changes to financial forecasts and adapting finance processes to rapidly evolving business models are top of mind.
Managing unexpected changes to financial forecasts and adapting finance processes to rapidly evolving business models are top challenges finance executives face in executing their day to-day activities.
Finance executives are also concerned with identifying how to align strategic, financial and operational plans towards common objectives and meaningfully analysing data across business units and regions. “All functions are working to meet these challenges and, as a finance head, we have to have visibility across all functions, how they are progressing [towards meeting goals] and ensuring that their direction is in line with overall strategic goals,” says Lalit Malik, CFO of Dabur, an Indian consumer goods manufacturer. It is incumbent upon CFOs therefore to be prepared not only to help their own function navigate uncharted territory, but the rest of the business too. That means breaking down the silos that commonly exist in organisations, in order to collaborate closely across functions, sharing information and data in the pursuit of common objectives.
All functions are working to meet these challenges and, as a finance head, we have to have visibility across all functions, how they are progressing [towards meeting goals] and ensuring that their direction is in line with overall strategic goals - Lalit Malik, CFO of Dabur, an Indian consumer goods manufacturer.
The clear custodian of collaboration
There are a number of reasons why the role of leading cross-company collaboration around steering should fall to the CFO and their team. First, through the activities of budgeting, the finance function is the custodian of the clear, quantitative expression of management expectations and determines how resources such as cash and people will be allocated in order to achieve them. In our survey, 90% of respondents say that finance should facilitate collaborative enterprise planning to ensure that operational plans are aligned with financial and strategic plans.
Second, through performance management, the finance function is the gatekeeper for critical data that illustrate how well—or otherwise—the company is rising to the challenge of change. That includes data relating to sales, supply chain and delivery, which need to be reported back to the business in ways that help drive improved decisionmaking. Our survey reveals that companies in which finance executives feel empowered to drive strategic decisions across business functions are more likely to report a higher financial performance in fiscal year 2016/17 and 2017/18 and anticipate higher growth rates for 2019/20.
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As businesses generate and manage vast amounts of data, companies have more opportunities to gather data, incorporate insights into business strategy and continuously expand access to data across the organisation. Doing so effectively—leveraging data for strategic objectives—is often easier said than done, however. This report, Transforming data into action: the business outlook for data governance, explores the business contributions of data governance at organisations globally and across industries, the challenges faced in creating useful data governance policies and the opportunities to improve such programmes. Learn more by downloading our whitepaper below.
The covid-19 pandemic will not only directly disrupt international trade but also catalyse other trends that are reshaping the global exchange of goods and services.
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.
