Their names are Haier, CITIC, Temasek, Infosys, Dubai International Capital, Mubadala or MTN. Although unknown to the public, they are spearheading a considerable revolution that will transform the world of competitiveness in 2007. Successful emerging nations, such as China, Singapore or Dubai, are now embarking on a buying spree for companies abroad. They have the skills, the connections, and more than everything else, they have money, huge amounts of it! New players are blossoming everywhere. Western countries are in the hot seat.

These are the priorities that will be addressed in 2007 by the IMD World Competitiveness Center which has pioneered the study of competitiveness and published the renowned IMD World Competitiveness Yearbook since 1989. The Center offers the world’s most comprehensive knowledge and database monitoring the competitiveness of nations. Its director, Professor Stéphane Garelli, has recently published a book, Top Class Competitors (Wiley), which also addresses these issues.

China has just passed the $1’000bn threshold in foreign currency reserves, the largest in the world. Russia, Taiwan, Korea, India, Hong Kong and the Gulf countries are also stacking up money at an impressive rate. What will they do with it? Traditionally, they have invested it in US Treasury bonds or in real estate in America and Europe. This was good news for the US and several European countries plagued by budget deficits and debt. For them, the money would always come back home and finance their standard of living. Not anymore…

China is now putting her money elsewhere and is buying industrial assets. It did not work with Unocal, the US oil company – too sensitive – so China turned to Africa. More than 700 Chinese companies are now operating in Asia and the nation is buying up all the energy assets it can get its hands on. India is playing the IT card and its software and service companies are tough competitors. Dubai is diversifying in everything from shipping to finance. Prince Alwaleed Bin Talal from Saudi Arabia is taking important stakes in banking, computing and the hotel business. MTN, the telecommunication company from South Africa, is expanding all over Asia and advancing into the Arab world. Temasek, the investment arm of the Ministry of Finance in Singapore is interested in Shin Corp in Thailand. Mubadala from Abu Dhabi is looking at German companies, among others. But it is not all about buying. It is also about investing locally. It is estimated that more than $700bn of projects are now conducted in the Gulf region, mostly financed by the surplus generated by oil and gas. Less and less money is going back where it came from: the industrialized world.

The consequences? A new world of competitors, essentially from Asia, Russia and the Gulf countries is learning to stand on its own feet and to operate within its own borders. Why should only western companies exploit the formidable business opportunities that arise in the developing world? It is not a cozy world anymore, competition will become tougher. The US and Europe will suffer if they do not put their financial houses into order. Households cannot continue to foolishly build up debt if the sources of wealth are generated abroad. Governments cannot quietly ignore deficits if the lenders turn their attention away to better opportunities.

2007 will be a year of increased tensions. Investing in the industrial jewels of the western world is a sensitive matter that creates political turmoil. China, Russia, Singapore, India and the Gulf countries are all experiencing a new kind of “protectionism” for their investment. However, the buying frenzy will not stop in 2007, on the contrary. The geopolitical consequences will also be formidable. Large competitive superpowers will want to use their economic muscle on the political scene: China is doing it in Africa and Russia in Europe with energy supplies as a lever. The gloves are off!

Alessandro Sofia
IMD Media Relations
Tel: +41(0) 21 618 0636
Contact Alessandro Sofia