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Meaningless Europe? Conference „The Future of European Regions” Warsaw, Poland 1 June 2007

Meaningless Europe? Conference „The Future of European Regions” Warsaw, Poland 1 June 2007. Dr Krzysztof Rybiński* National Bank of Poland Deputy Governor Email: krzysztof.rybinski@nbp.pl Blog: www.rybinski.eu.

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Meaningless Europe? Conference „The Future of European Regions” Warsaw, Poland 1 June 2007

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  1. Meaningless Europe?Conference „The Future of European Regions”Warsaw, Poland1 June 2007 Dr Krzysztof Rybiński* National Bank of Poland Deputy Governor Email: krzysztof.rybinski@nbp.pl Blog: www.rybinski.eu *Views presented here are my own and they do not necessarily represent the official position of the National Bank of Poland or the Financial Services Authority

  2. The past

  3. Argentina was at U.S. level 100 years ago GDP per capita in Argentina(U.S.=100, constant prices, PPP) Source: Maddisson, Historical Statistics for the World Economy

  4. Europe has been losing distance in the last 10 years GDP per hour and GDP per capitain the UE-15 (U.S.=100, constant prices, PPP) Source: Groningen Growth and Development Centre and the Conference Board, Total Economy Database, January 2007, http://www.ggdc.net

  5. … and R&D spending gap has widened Total R&D expenditure per capita(in ECU/euro) Source: Eurostat

  6. … knowledge creation in Europe remains weak … Patents applications to EPO and granted by USPTO per million of inhabitants Source: Eurostat

  7. … and people work less in Europe Source: Prescott, Why Do Americans Work So Much More Than Europeans, Federal Reserve Bank of Minneapolis, 2004

  8. At the same time in different part of the world …

  9. Asian NIEs have been catching up with U.S. GDP per capita (PPP, U.S.=100) Source: Groningen Growth and Development Centre and the Conference Board, Total Economy Database, January 2007, http://www.ggdc.net

  10. … inward FDI has boomed … Inward FDI Stock in 1980 and 2005(in % of GDP) Source: UNCTAD

  11. Asian Tigers export high-technology goods High-technology exports*(% of manufactured exports) * aerospace, comp, electr, ICT, pharma, machinery, scientific instr., chemistry * Hong Kong: 1992 Source: World Development Indicators, World Bank

  12. … and have deep and liquid financial markets Stock exchange turnover (in % of GDP) Source: IMF IFS, World Stock Exchanges.

  13. In late 20th century new power emerged

  14. It is Chindia time … GDP per capita (PPP, U.S.=100) Source: Groningen Growth and Development Centre and the Conference Board, Total Economy Database, January 2007, http://www.ggdc.net

  15. Chindia as a top FDI destination(FDI Confidence Index 2005) … as it becomes the top FDI destination Source: AT Kearney, DB

  16. Where R&D efforts are located*(% of respondents) … and increasingly the home of world R&D * based on a survey of the world’s largest R&D spenders Source: UNCTAD WIR 2005

  17. Where great ideas are generated?Number of patents registered by residents (in 1000’s) Future is increasingly shaped in Asia Source: WIPO Database

  18. Who will be the winners of the knowledge-based 21st century?

  19. total enrollment to population in the age officially corresponding to the tertiary level of education (left scale, in %) tertiary educationparticipation (right scale, in millions) Tertiary education Large pool of educated Chinese minds … Source: World Development Indicators, World Bank UNESCO Institute for Statistics

  20. Where great ideas will be generated in the future? Chindia as the 21st century idea powerhouse • Chindia: 6m university graduates per year • In China 600,000 engineering graduates per year • However, only some 10% would qualify to work directly in multinational corporations Source: DB estimates

  21. Global corporations, today and tomorrow New global firms will come from Chindia … • In 2006 in `Fortune 500’ there were 163 European firms and 44 Asian firms (20 from China) • In 20-30 years the picture will be (possibly dramatically) altered • RDE100 list (global challengers: China 44, India 21, Brazil 12, Russia 7, Mexico 6) • RDE100 companies engaged in almost 200 outbound M&A transactions in the last 5 years • Learn new names: Hunlan, Dongfeng, Huawei, Lenovo, Mahindra, Satyam, Tata, Wipro, … Source: BCG The New Global Challengers report (May 2006)

  22. … and world financial center will move to Asia Stock exchange turnover (U.S.=100) * China: Shanghai and Shenzhen on 8th of May U.S. and London’s turnover on 7th of May Source: Financial Times, 9 May 2007; World Federation of Exchanges

  23. Population: 1950, 2005 and 2050 Demographics will hit Europe hard, and will support Africa and Asia Source: UN demographic forecasts

  24. China and India will outgrow U.S. Relative GDP (US=100) Source: PricewaterhouseCoopers, based on PPP

  25. Relative GDP (US=100) Developing countries will outgrow European giants Germany + France + Italy + UK vs. Mexico + Brazil + Turkey + Indonesia Source: PricewaterhouseCoopers, based on PPP

  26. Grand question: What should be Europe’s response?

  27. Can fat old dog bark at the charging dragon? Source: flickr.com

  28. YES, BUT IT NEEDS A NEW VISION and STRATEGY Vision (example): Europe to become headquarters of the world service hub Ideas are generated in Europe, simpler parts of business processes are sourced in the world

  29. Strategy (think outside the box) Example of tomorrow thinking „ … announced the establishment of his foundation with an endowment of 10 billion dollars, focusing on human development in the region. The foundation will facilitate and promote knowledge creation and dissemination, and will nurture future leaders, providing them with equal opportunities with the aim of building a knowledge-based society” Foundation in one of Arab countries Financial Times, 31 May 2007. • Support innovations development and promote innovative minds (active e-government, support development of intellectual capital) • Make sure fiscal policy also supports breeding ideas and innovations (more and better targeted R&D within balanced budget) • Get ready for big migration, prepare policies • Stop thinking „TODAY”, think „TOMORROW”

  30. EUROPE IF YOU DO NOT WANT TO BECOME ARGENTINA OF THE 21st CENTURY WAKE UP!!! GDP per capita in Argentina(U.S.=100, constant prices, PPP)

  31. EM reserves What future: Europe in the World Reserves held by emerging markets CBs and SWFs topped 5 trillion dollars in 2006 Source: Hildebrand (2007), author’s modifications

  32. What future: Europe in the World China reserves topped 1.2 trillion dollars in March 2007 • China alone holds almost as much reserves as all hedge funds in the world • China is the single biggest financial powerhouse in the world

  33. What future: Europe in the World (Trans) regional financial integration accelerates • Regional financing mechanism (CB reserves pooling to prevent future crises, will Asian Monetary Fund be created?) • Strong Chinese lending and FDI in African countries (Chinafrica) • Common Asian and African currencies will likely be created in XXI century (AMU/ACU, GCC and other regional currencies) • Future growth axis Asia-Africa bypasses Europe.

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