A new age of globalisation

Saturday, 01 March 2014

Zilla Efrat  photo
Zilla Efrat

    Nader Mousavizadeh believes the world is entering a new period of globalisation characterised by more fragmentation between countries and greater government interference. Zilla Efrat reports.

    Directors must prepare for a new age of globalisation and ask the right questions to ensure their organisations respond correctly and quickly enough. That is the word from Nader Mousavizadeh, a globally recognised adviser and writer on geopolitical and macroeconomic issues, who will be a keynote speaker at Company Directors’ national conference on Hamilton Island in May.

    He believes this new period of globalisation will be defined, firstly, by fragmentation – that is, an increasingly diverse set of economic, political and cultural rules in different countries.

    While groups like the G20 seek to harmonise regulation, Mousavizadeh, the founder and managing director of UK-based Macro Advisory Partners, says there are many pressures going the other way. “The ideal for a long time has been to create more of a global market, but that has been very hard to do. It’s very difficult to achieve global rules, terms of trade and international agreement on issues like climate change,” he says.

    “Countries are increasingly of the opinion that they can compete better on their own and that they should help their own companies rather than those of other countries. This means regulation is not becoming more integrated, making it ever more challenging for companies with a global footprint.”

    He adds: “Emerging markets, whether they be Nigeria, Turkey, Brazil or Indonesia, now have stronger economies and are able to fund more independent views of how they want to trade. They can choose who they want as partners and where they want to invest.”

    Mousavizadeh says China believes in its own distinct model and isn’t looking to give it up.

    “Take the way the Chinese invest in Africa, for example. It is really quite different to how companies from the UK, US or Brazil invest. This has to do with seeking advantages and access to commodities, but it is also about saying: ‘We are different’.

    “The Brazilians are saying it too. They have a different profile and image in Africa to companies from other countries. After its success story over the past 10 years, the Brazilian leadership is now taking its own approach to how it grows its economy and creates more equity in society, and this influences its companies. This type of diversity is being increasingly reflected on a global scale as countries become economically stronger and have less of a need or incentive to try to look like Europe or the US in the way they govern themselves.”

    Mousavizadeh says Australian directors will need a differentiated understanding of the markets they operate in. “They will also have to understand this fragmentation when they look at capital markets or the behaviour of banks around the world. The banks are increasingly looking to have a smaller number of markets. They are strengthening their own institutions and balance sheets in their home markets and then competing more selectively rather than trying to be really global.”

    Mousavizadeh says the second trend defining this new age of globalisation is the heightened role played by policy and politics. “The role of government has become more important as a result of the fallout from the global financial crisis. There has been more regulation and a company’s ability to compete is now increasingly affected by government involvement and assistance.

    “Directors will need a better understanding of how policy and politics affect their markets and the future of their organisations.”

    Directors may be concerned that the pendulum has swung too far to the other side in terms of increased regulation. But Mousavizadeh says: “That is a reality that has to be dealt with. A responsibility of directors is to help management understand the regulatory environment better and to engage regulators on behalf of their organisations to help them make smarter, better and more insightful regulation.”

    He says these are pressures from above for directors, but there are also pressures from below. These days, he says, “directors have to consider the demands from a broader set of constituencies and much of this has to do with trust – that is, how much organisations are seen to contribute to society, their level of general engagement with broader social political issues such as inequality and so on”.

    Mousavizadeh adds that directors should be asking how their organisations will compete in a rising interest rate environment.

    “We’ve had almost 30 years of declining interest rates. But with the US Federal Reserve beginning to taper in December and a looser monetary policy out of the US, things are going to change. This has implications for everyone. It may be particularly dramatic for some of the emerging markets. Of course, China is the big question here. How will it navigate this change given it is already navigating a complex set of priorities – growth, social stability, employment, urbanisation and a complicated banking and financial system?”

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