Painful period of global financial de-leveraging to result in slower growth, says TiE Global Chairman

Mr Apurv Bagri, Chairman, The Indus Entrepreneurs (TiE) Global, Board Member of the Dubai Financial Services Authority and Managing Director of Metdist Group, UK, said this period will result in a slowdown of global growth in the next five years with a heightened risk of global recession.

In his address on 'Globalisation and the Credit Crisis,' Mr Bagri told members of the TiE Dubai chapter that "there will be a backlash to globalisation as recession puts pressure on some governments to maintain the architecture of globalisation."

Mr Bagri said: "The middle class in many countries will be under pressure from rising unemployment and costs of living, and will demand their governments to adopt protectionist policies against foreign imports and investment. Governments will seek an external scapegoat and that could be China and other Asian countries, just as it was Japan in the late 1980s and early 1990s."

On the impact of the changes, he said: "Managing the financial assets will change dramatically. High-value added products would now need a base in China and/or India to optimize the benefits of the large domestic market. Low-value products will be increasingly located in Vietnam, Laos and Cambodia. And China's economic structure will change from a dependence on export growth to internal growth."

Mr Bagri said that true globalisation is the ability to shift capacity to countries that offer the best results in terms of efficient supply chains, pools of competitive and skilled labour and a host government that is business friendly.

"Globalisation has created very considerable inter-dependence between countries as companies seek to optimize their supply chain costs. This inter-dependence has created economic wealth across participating countries - an important benefit of globalisation, which, however, is no more than a management tool. It is up to us to use these tools to add value to our businesses," he said.

Mr Bagri urged business owners to continuously think forward to bring value to their businesses. "The world of business is forever shifting. Today, Asia is the focus for relocating businesses. Tomorrow, the focus may well shift elsewhere."

Highlighting the need for value generation, he quoted McKinsey's report, 'Beyond Cheap Labour': "No place can remain the world's low cost producer forever - even China will lose that title one day. Instead of trying to defend low-wage assembly jobs, middle-income countries should focus on creating jobs that add value."