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Countries such as Malaysia, India, China, Saudi Arabia and Indonesia are likely to be among the world’s leading economies in 2050, with many of the current leaders falling away


in many cases the average level of education has entirely caught up with the West. Still, having a large and willing workforce


isn’t enough to guarantee growth. Promoting investment also requires sound economic governance. Monetary stability, the level of democracy, the rule of law and level of government interaction are just as important. In recent decades there’s been considerable progress in emerging economies in this field, with many, such as China, turning from inward- to outward-focused policies. Others, like Latin America, have stamped out the inflation that plagued development in the past. What is also important is how ‘developed’ a


country currently is. If a low-income economy has the right economic infrastructure, growth will be amplified in the short-term as additional investment produces high returns.


The risers… Using this model, we can see Asian countries, excluding Japan, perform well. China and Malaysia have good foundations in all categories, while India, Indonesia and Thailand are improving, and their growth rates will accelerate over the next 40 years. Latin America, helped by a growing


demographic, produces good growth rates, with Colombia looking set to deliver the fastest growth in the region. Mexico and Venezuela will also make substantial progress up the global league table, while Brazil’s relatively low projected growth rate may be outweighed by its natural resources. Russia is expected to continue its rapid


expansion, but scores fewer points for financial stability and has a less supportive demographic outlook than some of its Asian rivals, which limits its relative performance. Turkey and Egypt each look set for a better run. In essence, it will come as no surprise that


the emerging countries best placed in the 2050 ‘league table’ are China and India.


… and the fallers? So what does this all mean for the developed countries? The US and UK, with better demographic outlooks, will be relatively successful at maintaining their positions on the global league table. The US, in particular, will remain a dominant force at international


The seismic shift in the global economy will see emerging economies rising to become world leaders


policy meetings. By contrast, well developed economies in Europe with small populations will find themselves slipping rapidly down the food chain, or disappearing from the top 30 altogether. Sweden, Austria, Norway and Denmark will all fall off the list by 2050. These countries may therefore have less of a say in global policy. As competition builds for the world’s


scarcest resources, this may become a real factor in the future of many countries’ ranking in the global economy. It also adds a whole new dimension to the current eurozone crisis, providing a significant and very real incentive to European countries to work through their current difficulties. Of course, this isn’t the end of the story; by


2050 the seismic shift in the global economy will really only just have begun. This is underpinned by the fact that despite a seven- fold increase, income per capita in China will still be only 32 per cent of that in the US and scope for further growth will be substantial. So how do businesses in the offshore


jurisdictions best manage the shift that is taking place? Firstly, they can capitalise on the


burgeoning growth in all emerging markets through a robust regulatory infrastructure and making moves to link with new economies. The governments of Jersey and Guernsey and their financial-service promotional bodies, bankers, fund managers and lawyers have already begun the journey of cultivating contacts within key growth regions, and this already seems to be paying off. Jersey and Guernsey have each signed up


to a considerable number of Tax Information Exchange Agreements (TIEAs) with other countries, including India, China, Japan and Indonesia, and are negotiating agreements with emerging countries such as Korea – which will also support new investor confidence in trading with the islands. The world is changing dramatically;


there will be winners and losers in the global economy over the next 40 years. The Channel Islands however remain in a strong and competitive position to capitalise on the fall out. n


KAREN WARD is Senior Global Economist at HSBC


February/March 2012 businesslife.co 49


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