Mansoor Dailami The World Bank Copenhagen, Denmark June 17, 2011
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Mansoor DailamiThe World Bank
Copenhagen, DenmarkJune 17, 2011
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Multipolarity: A New Global Economy
• A new global economic order is unfolding as the balance of global growth shifts from developed to emerging economies
• Multinationals from emerging markets will be increasingly important sources and drivers of global investment flows
• The international monetary system will move toward a multi-currency regime
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In the post war era, three poles have served as the engine of global growth…
Sources: Global Development Horizons 2011, based on Maddison.
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…with several EM countries beginning to join the ranks of big powers
Sources: Global Development Horizons 2011, based on Maddison.
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• Multipolarity– The concurrent existence of more than two global
growth poles
• Growth poles– An economy that drives global growth by virtue of its:
(a) size (b) dynamism (c) linkages with the rest of the world
• By 2025, leading emerging economies such as Brazil, India, Indonesia, Korea and Russia are likely to join the ranks of China and the advanced economies as global growth poles
Looking ahead: EM countries will be key players in a multipolar world
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Emerging economies are increasingly becoming the drivers of global growth…
1994–98
Global distribution of growth poles
2004–08
1994–98
2004–08
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…with the demographic dividend contributing to this strong growth performance
7Sources: UN population projections
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 205050
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Indonesia
Brazil
India
China
Share of working-aged population (15-59 yrs), 1980–2050
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Firms from emerging market countries have a growing presence among corporate innovators
Sources: Global Development Horizons 2011, based on UK Dept. for Business, Innovation and Skills 8
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Increasing cross-border M&A deals originating in EM is a feature of the new corporate landscape
Sources: Global Development Horizons 2011, based on Thomson-Reuters.
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EM firms have become important borrowers in global markets
Sources: Global Development Horizons 2011, based on Dealogic.10
$ 123 b.
$ 461 billion
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EM corporate cost of foreign capital has declined, but remains higher than in developed countries
Sources: Global Development Horizons 2011, based on Dealogic.11
U.S. dollar corporate bond spread to benchmarks
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With rising prominence of EM as a source of FDI,it is time to think about a multilateral framework
to govern cross-border investment flows
Sources: Global Development Horizons 2011, based on International Centre for the Settlement of Investment Disputes. 12
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Regarding the future of international monetary system, three potential scenarios can be envisaged
• A status quo centered on the US dollar
• A system with the Special Drawing Rights (SDR) as the main international currency
• A multicurrency system
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Disparities between emerging markets’ economic size and their role in international finance remain
large but will narrow
Sources: Global Development Horizons 2011, based on World Bank WDI, IMF DOT, Thomson Reuters, BIS and Dealogic 14
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Historically few currencies have dominated the international currency system
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1860-1914 pound
dollar
since 1920s 1930s
dollar
pound
franc
1980s
dollar
D mark
yen
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dollar euro renminbi
21th c.
This century may witness the emergence of a new multi-currency system
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The use of renminbi in trade settlement is growing…
Sources: People’s Bank of China.
China’s total exports 2010: $1.75 trillion China’s total imports 2010: $1.52 trillion
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…and the renminbi offshore market has taken off on the back of government policy…
Source: Hong Kong Monetary Authority Source: Dealogic DCM
• On the equity side, the Hong Kong Stock Exchange will launch its first renminbi-denominated IPO.
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While commodity prices have seen significant pressure in recent times, in part due to demand
from emerging economies…
Sources: Global Development Horizons 2011.19
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…multipolarity is likely to impact long-run base metals prices more than agriculture and energy
Sources: Global Development Horizons 2011.20
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Sources: Global Development Horizons 2011, based on IMF DOT and Thomson-Reuters.21
In managing the transition underway, it is necessary to assist Least Developed Countries to adjust to the challenges of a multipolar world
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Large and medium-sized economies have rarely sustained high growth rates for an extended
period of time
Sources: World Bank WDI22
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Conclusion
• The postwar global economic structure –defined by the dominant position of advanced countries– is in the midst of a fundamental change
• Rapid globalization and expected higher growth rates in emerging market economies will translate into greater economic influence for developing countries
• The move to multipolarity will be by and large positive for developing countries, but the transition needs to be managed
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