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Meaningless Europe? Conference „The Future of European Regions” Warsaw, Poland 1 June 2007 Dr Krzysztof Rybiński* National Bank of Poland Deputy Governor.

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Presentation on theme: "Meaningless Europe? Conference „The Future of European Regions” Warsaw, Poland 1 June 2007 Dr Krzysztof Rybiński* National Bank of Poland Deputy Governor."— Presentation transcript:

1 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 krzysztof.rybinski@nbp.pl Blog: www.rybinski.eu 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 Rybinski.eu 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 Rybinski.eu Europe has been losing distance in the last 10 years GDP per hour and GDP per capita in 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 Rybinski.eu … and R&D spending gap has widened Total R&D expenditure per capita (in ECU/euro) Source: Eurostat

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

7 Rybinski.eu Source: Prescott, Why Do Americans Work So Much More Than Europeans, Federal Reserve Bank of Minneapolis, 2004 PeriodCountry Relative to U.S. (U.S.=100) Output per person Hours Worked per person Output per Hour Worked 1993-96 GermanyFranceItaly United Kingdom 7474576775686488991109076 1970-74 GermanyFranceItaly 757753581051058211072746562 … and people work less in Europe

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

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

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

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

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

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

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

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

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

21 Rybinski.eu Global corporations, today and tomorrow In 2006 in `Fortune 500’ there were 163 European firms and 44 Asian firms (20 from China) 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 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 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 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, … Learn new names: Hunlan, Dongfeng, Huawei, Lenovo, Mahindra, Satyam, Tata, Wipro, … Source: BCG The New Global Challengers report (May 2006) New global firms will come from Chindia …

22 Rybinski.eu … and world financial center will move to Asia 2005 8th of May 2007* United States 100100 London 2324 China 240 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 Rybinski.eu Population: 1950, 2005 and 2050 Source: UN demographic forecasts Demographics will hit Europe hard, and will support Africa and Asia

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

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

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

27 Rybinski.eu 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 Rybinski.eu Strategy (think outside the box) Support innovations development and promote innovative minds (active e-government, support development of intellectual capital) 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) 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 Get ready for big migration, prepare policies Stop thinking „TODAY”, think „TOMORROW” Stop thinking „TODAY”, think „TOMORROW” 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.

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

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

33 Rybinski.eu 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 alone holds almost as much reserves as all hedge funds in the world China is the single biggest financial powerhouse in the world China is the single biggest financial powerhouse in the world What future: Europe in the World

34 Rybinski.eu (Trans) regional financial integration accelerates Regional financing mechanism (CB reserves pooling to prevent future crises, will Asian Monetary Fund be created?) 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) 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) 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. Future growth axis Asia-Africa bypasses Europe. What future: Europe in the World


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