Globalisation with a Heart

Good afternoon ladies and gentlemen.

I’m delighted to be in such distinguished company today. I’m honoured to be asked to deliver the keynote address for this Influential Brands’ CEO Summit here in Bangkok.

Bangkok was my second home for a while when I worked here in the land of smiles. It was here that I discovered my calling more than six years ago!

A calling to do what I had done in the past 2 decades, on and off – to go into trading full time. That in turn started my entrepreneurial journey, which led me here today.

Globalisation in Peril

This afternoon, I would like to share with you my thoughts on a pressing issue that has been a hot topic for some time, which got hotter with recent developments.  The topic is the internationalisation or globalisation of businesses.

Looking at the state of the world today, one may well think that the world’s love affair with globalisation could be well over.

Just look at the evidence. The UK is in the middle of a potentially messy separation from the European Union. In the United States, President Trump champions an “America First” policy.

There’s an escalating trade war between the world’s two largest economies – the US and China, with no resolution in sight.

Nationalism seems to be on the rise.  Protectionist sentiments are surging in many countries.

From an economic point of view, there appears to be a structural delinking of trade and GDP growth. Trade, which is measured as total imports and exports, is a hallmark of globalisation.

According to a recent Boston Consulting Group paper, from 1960 to 2008, the trade-to-GDP ratio grew by 35 percent. Over the last five years, it has grown by only 0.2 per cent. That’s a very significant contrast.

There are also those who suggest that labour costs in emerging markets are becoming too expensive, leading some companies to “re-shore”, by brining manufacturing back to their home countries.

But the BCG report doesn’t think that globalisation is dead. Instead, it suggests that a new, radical phase of globalisation is needed to rebalance the geo-politics and geo-economics of a new, multipolar world.

I agree. Globalisation is not dead. But it needs a reboot.

Old Order of Globalisation Breaking Down

Why?  Because the old order of globalisation is in grave danger of collapse.

Western powers such as America no longer dominate the global economy.  Asia is on the rise. New economic and political powers have emerged.

China and India are fast becoming powerful and influential economic hubs. They will play a big role in shaping the future of globalisation and the global economy.

I would argue that the last wave of globalisation, which started in the late 1980’s with the onset of the internet, has almost run its course.

In that wave, global trade opened up, and trade barriers were lowered. Goods, services and people moved quite freely across national borders.

As part of globalising their businesses, companies started outsourcing, to developing countries with low-cost manufacturing and services. They also created integrated global supply chains.

It generated great wealth and prosperity for many countries, enterprises, and shareholders. It minted many billionaires.

It also helped hundreds of millions of people move out of poverty over a period of more than 20 years. According to World Bank statistics, more than 500 million people were lifted from poverty in China alone.

The world became more interconnected with the internet and technology. People enjoyed better food, housing, medical care, and greater mobility.

Globalisation ignited economic growth. It drove technological progress. It increased profits and shareholder value for companies. Many people benefited from it.

According to a recent Harvard Business Review report, the global top 1 per cent and the Asian middle class gained the most from it.

In short, in fuelled a boom of capitalism.

Rise of Robots

But, globalisation as we know it, is being disrupted.

The emergence of new global realities has rendered the old order of globalisation unsustainable.

The first such new reality is technology, with the rise of robots and artificial intelligence. They are displacing humans from their jobs.

Just look at these recent examples.

Last month, China’s Xinhua news agency unveiled a “digital news anchor”. It can work 24-7, from anywhere, to deliver news to millions of people in the country.

This digital news anchor was developed using artificial intelligence and machine learning to simulate the voice, facial expressions and gestures of real life broadcasters. They appear as a very “life like” image, and can do the news in Chinese and English.

Another example is Amazon Go’s unmanned grocery stores that opened early this year. They are the future of retailing. No shopping carts. No cashiers. And no queues to pay for your purchases.

Instead, it employs sophisticated image recognition software, AI, mobile app, and e-payment.

AI and machines can replace humans in many jobs, with improved productivity, efficiency, and cost.

Chatbots such as Google Home or Alexa, could replace the need for telemarketers or customer service staff in the longer term. The list goes on, and it’s a long one.

The rapid growth of digital platforms and e-commerce is also rendering national borders and country-based business models obsolete.

Today, goods worth more than 700 billion US dollars are traded through the world’s two largest e-commerce platforms, Alibaba and Amazon. This represents a staggering compounded annual growth rate of more than 33 percent since 2012.

According to a Boston Consulting Group, the adoption of digital technology in manufacturing will increase output per worker by 30 percent. And it will reduce labour cost by the same amount in the medium term, in countries such as South Korea, Germany, the US and China.

Adidas had recently announced that it is moving some of its production from China back to Germany, because advances in robotics make it cost effective to do so.

Foxconn, the Taiwanese manufacturer of Apple’s iPhones, is China’s largest employer, with 1.3 million workers. It has invested heavily in next-generation robots. Last year, it replaced 60 000 workers with robots in just one factory.  This represented 55 percent of that factory’s total work force.

Higher productivity is great. It means companies can do more with less. But it also means fewer jobs, lower employment and income.

It is estimated that by 2030, employers will need 20% to 30% fewer workers because of automation. This is equivalent to doing away with 30 to 40 million jobs in the US alone.

Technology is transforming global businesses, disrupting globalisation, and turning the old order upside down.

The Shrinking Human Workforce

The second emerging reality that’s disrupting globalisation is an aging and declining global work force.

Figures from the International Labour Organisation point to a fall of more than 2 percent in work force participation rate in most regions – Europe, Asia, Middle East, and North America – from 2015 to 2030.

This will have serious and adverse implications for the global economy. As labour force declines or stagnates in many markets, the momentum for economic growth could slow.

Governments in many countries will face major challenges in managing retirement pensions; healthcare costs; productivity growth; falling purchasing power, lower demand for goods and services; and falling tax revenue.

Technology and automation can make up for the lost productivity from a declining labour force. But a growing output of goods and services will need a matching demand for them.

A lack of demand will constrain economic growth.

The baby boomers’ entry into global labour force in the 1970s resulted in a population boom. The same pool of baby boomers who boosted the work force in the 70s is now responsible for the decline, as they retire.

Add to this, many millennials are entering the work force later, because they tend to stay in school longer.

The convergence of these two trends – retiring baby boomers and delayed entry of millennials – will result in the decline of the global work force. This will in turn affect sustainable global economic growth.

Bain and Company highlighted that a slowdown in the growth of the work force in OECD countries could result in a 5.4 trillion US dollar GDP shortfall by 2030.

An Unequal World

The third reality that’s disrupting globalisation is the rising income inequality and the resulting consequences.

The last wave of globalisation has left some groups behind, marginalised and disenfranchised.

The World Inequality Report 2018, produced by a research centre based in the Paris School of Economics, showed that income inequality has gone up in nearly all countries in recent decades.

Since 1980, income inequality has increased rapidly in North America, China, India, and Russia. Inequality has also grown moderately in Europe. The world’s top 1 percent captured twice as much growth as the bottom 50 percent individuals since 1980.

The report also found that private wealth has increased significantly, while public wealth has declined since the 1980s.

This decline in public wealth limits governments’ ability to redistribute income, mitigate rising income inequality, and manage social disturbances.

Income inequality raises many social and political issues for countries and businesses alike.

It drives a widening gap between the elites and everyone else. And it is fuelling a rise of populism, nationalism, and protectionism. If left unchecked, it could lead to social, political and economic chaos.

The recent violent protest in France is a case in point. Demonstrators burnt cars, destroyed properties, and damaged national monuments.  On the surface, government’s plan to increase fuel tax triggered the protests.

But there’s a deeper problem – social and income inequality. According to a New York Times report, France, like other western countries, has a widening income gap between the richest and the poorest. The top 20 percent of the population earns nearly 5 times more than the bottom 20 percent.

George Soros once said, “I think there’s a lot of merit in an international economy and global markets, but they’re not sufficient because markets don’t look after social needs.”

Whether we like it or not, globalisation is a fact of economic life, with deep and far reaching social impact. My point is that globalisation cannot continue in its current form.

The breaking down of the old order and the emergence of disruptive new realities call for a bold pivot.

As business leaders and industry captains, I urge you to rethink, and re-imagine globalisation in a radical way.

Globalisation with A Heart

We need to globalise with a heart, first and foremost.

We must act boldly and responsibly to shape the next wave of globalisation and rebalance its benefits to build a more equitable and inclusive world.  Globalisation must benefit as many people as possible, not just the top 2 percent.

This will require a mindset change on the part of companies, their leaders, and shareholders. The question is, how can we do this in a way that creates wealth for most people, if not everyone?

Companies must go beyond maximising profits, minimising cost, and increasing shareholder value.  Just merely putting more emphasis on corporate social responsibility programmes will not be enough, anymore.

The next wave of globalisation must focus on building capability, capacity, and skills. It must enable access to opportunities; and it must invest in building human capital.

A recent Harvard Business Review report on the Agenda for the Future of Global Business, proposed some very viable solutions which I would like to share here, as food for thought.

The first is to reshape the global supply chain and production model that has been in place for the past few decades.

Shift the focus from importance of production scale, to increasing flexibility and enabling production to move closer to the end markets. With the technologies we have today, this has become reality.

This model allows businesses to reconnect with local communities.  Companies such as Adidas and Zara are already doing this to localize time-sensitive and highly customisable forms of production. This brings them closer to their customers.

The past decades of globalisation and economic progress have resulted in the concentration and domination of business by very large MNCs. Support for local start-ups has not been a key focus.

Well, now is the time to change that.

Technology allows us to create platforms and ecosystems that encourage local start-ups to collaborate and grow. One example is a cloud-based web service which can provide young start-ups access to scale benefits and flexibility that were previously not available.

Investing in human capital, developing skill sets, capability and capacity to operate in the new world of constant disruption, is an important way to counter the impact technology.

Companies need to work earnestly and urgently to future proof their workforce.  This will help increase career mobility and ultimately, close the income gap, and reduce income inequality.

Another way to globalise with heart is to enable access to basic goods and services such as housing, healthcare, and education.

The lower income groups often face higher prices for comparable goods. Inflation has a much greater impact on them than on other groups. Helping them improve access to basic goods and services, especially education, also means they will have more opportunities to do well, level up, and lead a better and more fulfilling life.

With technology and some creative thinking, business can innovate and disrupt existing models of providing such basic services.

The arrival of low cost airlines is one good example. It completely democratised air travel for many.

Finally, businesses can leverage technology creatively to do social good better.  AI and machine learning may have the potential to eliminate jobs and displace humans, but technology also has the potential to create new economic and social opportunities.

Blockchain technology for example, can have significant impact in expanding financial inclusion.

According to World Bank data, globally, 2 billion working adults don’t have access to basic financial services. In other words, they are unbanked. They don’t have direct access to credits, deposit accounts, money transfers, or insurance.  That can make life quite difficult.

Just imagine for a moment how, in this day and age, anyone of us here can live without a credit card, or a bank account for a day?

Can you? … I definitely can’t!

Many of these 2 billion adults don’t have access to basic financial services because their countries or regions lack banking infrastructure and systems. The cost of building the necessary infrastructure can be prohibitive and unattractive for traditional banks.

Blockchain technology and cryptocurrencies however, can provide a way out for this group of people. It does not need an expensive infrastructure to make financial services more accessible.

Fintech companies in Africa, with a little bit of ingenuity and mobile tech innovation, are providing financial services through mobile phones to Africa’s estimated 1.3 billion people.

One example is M-Pesa, a mobile-based money transfer and micro-financing app that has become very popular and is available to 30 million users in 10 African countries.

“Pesa” means money in Swahili. It started as a mobile payment platform in 2007 in Kenya. Today it is used for micro-financing, international fund transfers, even provision of some health services.

M-Pesa now works with China’s WeChat Pay platform. This makes it possible for many small Kenyan traders to pay for Chinese goods without using more expensive and slower bank options. The traders now no longer need to go through middlemen to order goods or make payments on their behalf.

Expanding financial inclusion for these unbanked billions will empower individuals and communities with new economic opportunities and live a better life.

Technology, if used thoughtfully and creatively, could do a lot of social good by uplifting lives. It could also become a new engine of economic growth for the world.

Do Social Good Better

Doing social good better is the mission of the Kenn Foundation, which I started last year.

The foundation’s vision is to create opportunities for the vulnerable and underserved communities in society through impact philanthropy.  This goes beyond mere donation to various causes.

We want to make a real difference by building capability and capacity.

We want to empower individuals and communities with greater access to opportunities through education, medical research, alleviation of poverty, and development of the arts and social sciences.

Kenn Foundation hopes to make a difference with its various programmes, by:

Uplifting individuals and communities by enabling access to opportunities;

Connecting funding and expertise of our partners, NGOs and companies to do social good better;

Innovating with creative solutions to social issues and the use of technology; and

Advocating for deserving causes by marshalling support, resources and expertise

Winston Churchill once said that “we make a living by what we get, but we make a life by what we give”.

How very true!

To sum up, given the emerging trends and realities, for companies to internationalise or globalise successfully, they need to do so, first and foremost, with a heart for social good.

Successful internationalisation is about growing a global presence with local relevance, both economically and socially.

Only with this new globalisation mindset can we, as leaders, meaningfully shape and grow future enterprises that empower individuals and communities with equal opportunities.

Then and only then, can we hope to build a more equitable and inclusive world.

Thank you.