CHAPTER 13
DEVELOPING
NATIONS
Developing Nations PRISMs
1. Should all forms of trade
protectionism be outlawed?
2. Do Godzilla nations have any
community responsibilities in Tiger
nations?
3. Should nations adopt a “living wage”
compensation policy for the
indigenous employees of foreign
companies?
4. Should Tigers be required by
economic GGOs to convert to private
capitalism?
SIGNS OF THE
TIMES FOR
DEVELOPING
NATIONS
1. About half of the workers in the world
(1.2B people) make less than $2 a day,
including 90% of workers in subSaharan Africa. These “working poor”
can’t make enough money to survive.
2. 800M people suffer from chronic
malnutrition; 40% suffer from
communicable diseases such as malaria
& AIDS; 33% experience serious water
shortages.
3. 20% of the world consumes 80% of the
world’s resourses; the income of the
richest 20% has risen from 30 times
greater than the poorest 20% to 82
times greater.
WAGES OF CLOTHING WORKERS IN
DEVELOPING NATIONS
Cambodia: 32 cents/hour
India: 38 cents/hour
Pakistan: 41 cents/hour
Sri Lanka: 48 cents/hour
China: 68 cents/hour
Jordan: 81 cents/hour
Thailand: 91 cents/hour
Honduras: $1.48/hour
El Salvador: $1.59
Mexico: $2.45/hour
DEPENDENCE ON CLOTHING/TEXTILE
EXPORTS
Macau: 82% the nation’s total exports
Bangladesh: 82%
Cambodia: 77%
Pakistan: 75%
Sri Lanka: 58%
Tunisha: 42%
Turkey: 38%
China: 21%
AFRICAN BUSINESS PROBLEMS
27 of the world’s worst business environments
are African. Business taxes in Sierra Leone are
3 times higher than the total profits most local
businesses make annually. Registering a new
business in the Democratic Republic of Congo
takes an average of 155 days and costs five
times more than the annual income ($120) of
the average Congolese citizen. Enforcing a
business contract in Angola entails 47 legal
steps and takes over 1,000 days. The
impossible business environment of most
African nations drives about half of small
business owners into the illegal informal
underground economy.
In Malawi, only 50,000 people (out
of a total population 12M) work in
the official economy. Other
business challenges faced by
business in Africa include bad roads,
unreliable electricity, frequent
currently fluctuations, employees
lost to AIDS, and the high cost of
business-related bribery. Africa
currently captures only 3% of global
foreign direct investment.
AIDS
1. 78M people are currently HIV
positive in the world (with Africa
having the 7 most infected
nations)
2. 34M have died worldwide from
AIDS thus far
3. Sub-Saharan Africa has been
losing 10-18% of its working
population annually to AIDS
4. Between 11.5-15M children
have been orphaned by AIDS
5. HIV rates increased by half
(1.1M) in East Asia between
2002-2204
6. The death rate from AIDS has
starting declining in 30 nations
7. Global funding for AIDS
increased from $2.1B in 2001, to
$6.1B in 2004
8. As a group, developing nations owe
more than a trillion dollars to foreign
creditors.
9. The 43 mostly sub-Saharan African
nations (500 million total population)
are getting poorer. They lost one
quarter of their income between
1980-2000.
10. Africa & South Asia had more
malnourished children in 2000 than in
1975.
11. During the 1990s in Russia, the
percent of people living in poverty
went from 2% to over 50%.
12. Business scams and frauds of
unprecedented magnitude ($30B+)
hit Eastern European nations during
the 2000s. Romania had 600+ Ponzi
schemes, where crooked finance
companies continuously borrow
money from a growing chain of
unsuspecting investors and create the
short-term appearance of financial
gain using money from new
“suckers.” Romania had 600+ Ponzi
schemes & more than half of
Albanians and their government were
fooled by similar scams.
13.
Over the past 2 decades, the
following nations were
classified for varying amounts
of time as “failed nation
states” (with corrupt nonfunctioning
governments/institutions &
lack of law & order): Ethiopia,
Eritrea, Afghanistan, Somalia,
Liberia, Yemen, Sierra Leon, &
Rwanda.
st
21
CENTURY
PROFILE OF
DEVELOPING
NATIONS
PROFILE OF DEVELOPING NATIONS
1. Dependence on agriculture,
commodities, & labor-intensive, low
value-added manufacturing
2. Weak institutions
3. Strong historical commitment to
protectionism
4. Small middle class
5. Often former colonies
6. Often struggling with ethnic or
religious tensions
MICs
Middle income nations (MICs) have a per
capita annual income ranging from
$1,000-$6,000: China, Philippines,
Brazil, Mexico, Argentina, Venezuela,
Indonesia, etc. These nations have at
least an emerging middle class social
structure, if not an established one
(amidst numerous pockets of poverty).
Global corporations target MICs for
both short-term & long-term market
development.
1.
2.
3.
4.
5.
ECONOMIC SPECIALIZATION OF
DEVELPING NATIONS
Low wages manual labor : China,
Indonesia, Philippines,
Skilled labor manufacturing: South Korea,
Taiwan
Specialized foods: Thailand, Vietnam, New
Zealand, Chile
Computer hardware: & electronics: China,
Taiwan
Oil, gas, & minerals: Mexico, Venezuela,
Indonesia, Russia
A LEGACY OF COLONIZATION
1. The vast majority of developing nations were
former European colonies in the 19th & 20th
centuries. The following “settler colonies”
were heavily infiltrated by ex-patriot
Europeans & their institutions in the 19th
century: Argentina, Australia, New Zealand,
& Uruguay.
2. These nations were partially colonized by
European settlement: Algeria, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Dominican
Republic, Ecuador, El Salvador, Guatemala,
Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, South Africa, & Venezuela.
3. The modern history of colonization &
civil war in many developing nations
(India, the Middle East, most of subSaharan Africa, etc.) produced an
unstable social & cultural foundation
for (historically late) nationalism.
4. When many of these nations
(Pakistan, Bangladesh, Eritrea,
Bosnia/Serbia, East Timor, etc.)
received independent statehood in the
20th century, their diverse and often
fractious population groups produced
only the semblance (“holograph”) of
nationalistic identity.
5. These new nations (Sierra Leone,
Congo, Rwanda, South Africa, Darfur,
the Palestinian territory, etc.) were
seldom politically united, frequently
fracturing themselves into
incompatible sub-populations (various
African tribes, Muslims vs. Hindus,
ethnic minorities, etc.) that competed
and warred against each other for
dominance—hardly a healthy
foundation for building the
institutional stability needed for
democracy & economic growth in the
integrated 21st century global
economy.
A LEGACY OF PERPETUAL
ECONOMIC STRUGGLE
1. Africa, Middle East, South
America, Central America, India,
China
2. Colonial legacy of exploitation
and political disruption
3. Reliance on low value-added
commodities (crops, minerals,
natural resources) for national
income and exporting
4. Plutocracies: In many developing
nations, weak institutions have
enabled a small minority of power
elites to perpetually control the vast
majority of wealth and political
power. The resulting absence of a
viable middle class restricts business
activity & economic growth. A status
quo society assures that the rich get
richer & the poor get poorer.
5. Political instability and civil wars
6. Population problems (subsistence
standard of living)
7. Protectionism: Keeping
foreign companies out, and thus
their superior technology,
management, and competitive
know-how that could help local
companies learn how to
compete more effectively)
8. Systemic corruption in
politics, the legal system,
human rights, etc.
9. Large debt owed to
international agencies such
as the International
Monetary Fund
10. Poorly trained workforce
and lack of business
infrastructure
(transportation networks,
banks, stock markets,
warehousing, etc.)
11. Rich nations play a significant role in
sustaining poverty in developing nations
by not importing the three categories of
exports that are most lucrative to these
nations: agricultural products, clothing,
and textiles. Many rich Western nations,
including the USA, heavily subsidize (at
$360 billion annually) their agricultural,
clothing, and textile industries even
though DCs have a strong labor cost
advantage that would enable them to sell
their products at lower prices in Western
markets if rich nations actually practiced
what they preached about free trade.
UNSAFE PRODUCTS
1. Several DCs have experienced serious
product safety deficiencies in recent
years.
2. The U.S. FDA rejected 1900 shipments of
Chinese food or cosmetics in 12 months
time; 1787 Indian shipments; & 1560
Mexican export shipments (especially
cantaloupes & candy).
3. The most common reasons for food
export rejections include use of
poisonous pesticides, contaminated
fresh food, & adulterated substances.
“If developed countries do not reduce their
protectionism and deepen their flows of
trade and foreign investment with
developing countries, the expected large
increase in the population of developing
countries (combined with the current
population stagnation of most developed
nations) may generate massive and likely
chaotic migratory flows (illegal
immigration) with grave consequences.
Developed countries must accept
increased immigration over the coming
decades to avoid social and economic
chaos.”
POSITIVE DEVELOPMENTS IN AFRICA
1.The New Partnership for African Development
(NEPAD) seeks to boost foreign direct
development in Africa through reassuring
investors that Africa is becoming more politically
stable and economically healthy. NEPAD is
targeting internal development via education,
agriculture, and energy.
2. It proposes that African nations engage in
mutual peer review to break the
entrenched “good old boy” pattern of crony
leadership. Currently the most
responsible/accountable African regimes are
those led by Thabo Mbeki (/South Africa),
Olusegun Obasanjo (Nigeria), John Kufour
(Ghana), and Abdoulaye Wade (Senegal).
DC’s HELP BUILD U.S. ECONOMY
Emergent economies (those making
significant progress towards
industrialization and middle class social
structure) are investing heavily in U.S.
government bonds to help finance
America’s trade deficits and government
spending deficits. This helps keep the
dollar strong (higher in value than it
should be) thus helping Americans to
purchase more exports from the
developing world.
ECONOMIC GROWTH IN DCs DEPENDS ON
SOCIAL INSTITUTIONS THAT CAN DELIVER:
1. Good statistics about the nation’s
economic growth & conditions
2. A framework of workable commercial
laws
3. Efficient markets for raising money
4. Efficient means of productivity
5. Employee development & training
opportunities
6. Social acceptance of capitalism,
competition, & wealth
THE
INVISIBLE
SYSTEM OF
SWEATSHOPS
1. Corporations, like people, usually take
everything available to them, including the
many advantages of working in developing
nations: low-priced, plentiful labor & suppliers;
diminished, or even non-existing, business
regulations; absence of unions; few human
rights, etc.
2. For as long as such profitable external
circumstances exist, many developing nations
go through the “sweatshop” period of
economic development. Many policy-makers
tolerate sweatshops as are the lesser of two
evils (better than unemployment) & temporary
until the nation can move up the value-added
curve, eventually erasing sweatshops.
3. During the sweatshop “stage” of economic
development, it is possible for some corporations
to “feast” on what often amounts to a selfperpetuating system of low wages, non-existent
worker rights, lack of job security, open pollution,
low public visibility, & often cozy relationships
with politicians.
4. This system remains largely invisible because it’s
culturally endorsed, the workers are in dire need
of jobs, & few consumers realize how low-priced
their products really are.
5. If sweatshops are at least temporarily inevitable,
should the international community seek to hold
sweatshops abuses during the temporary period of
their economic development to a minimum &
minimize how long they flourish?
THE WORLD’S
FLAWED TRADING
SYSTEM & UNFAIR
DISTRIBUTION OF
WEALTH
The vast majority of wealth is controlled by
a small minority of the (developed) world.
Some estimate that as much of 80% of
the world’s total wealth is controlled by
less than 20% of the global population.
Numerous cultural factors account for
much of this phenomenon, but the
world’s unfair trading system is also a
factor. Agricultural subsidies paid by rich
nations to their farmers distort global
wealth distribution by enabling
subsidized farmers to out-price their
competitors in developing nations who
don’t receive subsidies.
Developing nations charge that the IMF’S
program of import substitution
(developing nations indebted to the IMF
must import goods when they are
cheaper than those made at home) takes
takes away their food self-sufficiency and
subjects them to erratic food sourcing
when agriculture-exporting nations
experience crop shortages. DCs also claim
that global financial & economic
institutions (IMF, WTO, World Bank) are
dominated by Western policy interests,
thus protecting their over-sized share of
the global GDP.
CHANGING THE GLOBAL TRADING SYSTEM
Realigning the global trading system to produce
more equitable income distribution will require
progressive action from 3 spheres: national
governments, global government organizations
(such as the UN, WTO, & IMF), and global
corporations. National governments must
continue to pursue free trade regimes, but not
at the expense of DCs. GGOs must provide
DCs with greater access to policy-making
power, while global corporations must enlarge
their circle of stakeholders beyond financial
stockholders.
3-WAY INFRASTRUCTURE PROBLEMS
DCs are plagued with weak infrastructure
in 3 major areas: (1) Weak political
infrastructure (representative
government, weak governments checks &
balances, government corruption);
(2) Weak physical infrastructure (roads,
sanitation systems, communications
wiring, airports, etc.); (3) Weak business
infrastructure (financial markets,
warehousing, technology, transportation,
business services such as insurance, etc.)
THE MOST COMMON FORMS OF BUSINESS
CORRUPTION IN DEVELOPING NATIONS
1. Product pirating & black markets: Selling
stolen or “knock-off” versions of brand name
products at cut rate prices & without taxes
2. Bribery: In the absence of business
institutions & professionals (lawyers, CPAs,
title companies, stock markets, civil courts,
etc.), “facilitating payments” are a fact of
business life in developing nations. Many
times, these “bribes” are nothing more than
informal ways of paying for business
services not available via legitimate
institutions.
3. A 2006 World Bank study showed
that corruption has declined
somewhat in 26 ex-communist
(mostly Eastern European) nations.
“Corruption is becoming less
frequent, costly, & damaging.”
4. The report found that corruption
hurts private firms more than stateowned, small more than large, &
new firms more than old. “In short,
weak firms suffer more than the
strong.”
5. According to a Kenyan economic expert,
Western economic aid to Africa often
does more harm than good. For
example, when corn is donated from the
West, much finds its way into the hands
of corrupt political officials who sell
large volumes of it for personal gain or
to feed their rebel armies. Another large
portion is dumped on the black market.
“Local farmers may as will put down
their hoes; no one can compete with the
UN’s World Food Program.”
6. 7% of world merchandise ($500B) is
counterfeit, with 2/3 coming from China.
7. Rampant TV piracy in Asia, especially India
& Thailand, cost U.S. providers $1B
annually. Brazilian cable pirates have
erected 600,000 illegal cable connections.
8. Sales of black market computers in India
outsell legitimate retail computers 2 to 1.
9. 70% of cell phones in Malaysia are pirated
black market knock-offs.
10.The Brazilian “underground” (untaxed &
often illegal) economy makes up 40% of
the total GDP & 60% in Zimbabwe.
11. The frequent price booms & busts of the
global oil market & other commodities
(minerals, crops, etc.) are especially hard for
the shaky unstable economies of developing
nations to adjust to, as are the frequent ups
and downs of the imports/exports of these
fragile nations.
12. Many developing nations have not able to
sustain meager periods of economic progress
due to the unintended consequences of
austerity programs imposed by foreign
lenders, such as rise in unemployment & debt
interest payments; sell off of assets owned by
governments in private enterprises; political
unrest; & high interest rates used to curtain
inflation.
BUSINESS CHALLENGES IN
DEVELOPING NATIONS
1. Material inputs to the production
process are sometimes very scarce
(typewriters instead of computers).
2. An irregular supply of raw
materials can create havoc with
production scheduling.
3. Energy supplies are often erratic
and sometimes rationed (water,
electricity, gas, oil).
4. Capital equipment industries are
underdeveloped, and resources
for scientific and technological
development are generally
severely limited.
5. In protected markets, local
companies face no competitive
pressures to update their
technology and competitive
practices.
6. Problems with suppliers:
insufficient quality; high costs;
different product control
standards; inaccuracy in
meeting design standards;
delivery delays
7. Companies are almost forced
in the short run to be their own
suppliers because of the
shortage of outside suppliers.
8. Sometimes it is
advantageous to locate in an
industrial park, where
infrastructure is better and also
available to suppliers.
9. One complication of
competing in price-controlled
settings is the emergence of
illegal black markets for the
goods.
10. Serious weaknesses in
transportation infrastructure and
services, telecommunications, and
storage tend to make product
distribution a slow and expensive
process.
11. Poor quality of roads often causes
greater wear and tear on vehicles.
12. Prices, supply and demand data,
and product flow information are
not readily available.
13. In developing countries where capital
and commercial credit are scarce, sellers
must often engage in credit extension
activities.
14. Most consumers are not very mobile,
buy in small quantities, shop frequently,
and require credit because of
constraints of income (low and irregular
cash flow) and storage (refrigeration).
15. DCs frequently engage in regional
trade wars with one another instead of
working together as a united trade block
against more developed competitor
nations.
“FRONTIER ECONOMIES” (OPERATING
WITHOUT BUSINESS INSTITUTIONS)
1. China, Russia, Vietnam, Cuba
2. Business is unregulated and corrupt,
dominated by black markets,
smuggling, bribery, organized crime,
extortion
3. Due to the absence of legitimate
capitalistic institutions and a checks
and balances government, it is virtually
impossible to do business ethically in
frontier economies.
CORPORATE PROTECTION MONEY
Chiquita Brands was fined $25M by the U.S.
Justice Dept. in 2007 for paying $1.7M in
“protection money” bribes to two terrorist
organizations in Colombia: the United SelfDefense Forces of Colombia (responsible for
some of the worst terrorist massacres in ongoing Columbian civil wars) & the
Revolutionary Armed Forces of Colombia
(FARC, a major cocaine exporter). Chiquita’s
CEO explained that “The payments were
motivated by our good-faith concern for the
safety of our employees.”
1. To succeed in emerging markets, “we need
different mind-sets and market strategies.
We need managers who can envision creating
a business selling sachets of shampoo for
pennies, distributing products in stores the
size of phone booths, or offering credit cards
to people whose idea of banking is storing
rolls of coins in a money belt.”
2. Emergent market strategy requires innovative
"outside the box” strategic thinking in such
areas as doing business in a primitive
infrastructure, marketing to small and diverse
segments of customers, & redefining how
sales are financed.
3. For example, India’s small villagers
house 600M potential customers, but
42% of the villages are under 500
people. Emergent marketers have to
take the product to the people, even in
small diverse groups.
4. China & India lack true national
homogenous markets, but instead are
made up of a series of submarkets
(numerous regional areas & cultures)
which require unique business
strategies for one market a time. China
has 660 cities, but only 71M of its 1.3B
people reside in the largest 4 urban
areas.
MICROFINANCE
Muhammad Yunas, an economist from
Bangladesh, won the Nobel price in 2006
for his pioneering work in the creation of
markets in developing nations (via
Grameen Bank) for small (micro) loans
which harnessed the personal business
efforts of millions of grassroots
entrepreneurs. The emerging microloan
movement spread geographically to Latin
America, where Mexico’s
CompartamosBanco has generated a billion
dollar portfolio from its 900,000 microloan
clients.
On average, Compartamos loans $450 to each
client, generating $152 annually via a
controversial average interest rate of 79%.
Critics say that makes the Mexican bank “an
old-fashioned loan shark,” but Compartamos
argues that its profits are nurturing a microfinance industry financed by outside investors
pouring much-needed new capital into into a
truly globalized new industry. Seven new
microloan lenders have followed
Compartamos in the Mexican market, driving
down interest rates. Since becoming a public
company, Compartamos has also enrolled
60,000 of its clients in financial literacy
courses.
THE VALUE ADDED CHAIN (VAC)
1. Adding value to products is the key to
profitability.
2. Different degrees of value are added are each
stage of the product’s production. For most
products, value added increases the closer you
move towards the ultimate consumer of the
product.
3. Thus, designing and marketing the product
adds greater value (profit) than providing the
raw materials from which the product is made
or assembling the product.
4. Innovative (patented or copyrighted)
products garner the most profit because of
their intellectual capital.
CLASSIFYING NATIONS ON THE
VALUE-ADDED CHAIN
1. NATURAL RESOURCE EXPORTING: Oil
(Middle Eastern nations), rubber (Malaysia) ,
minerals (sub-Saharan African nations),
agricultural commodities, etc. (Lowest
classification on the value-added chain, &
hence lowest profitability)
2. NATURAL RESOURCE MANUFACTURING:
petrochemicals (Middle Eastern), cement
(India)
3. INTERMEDIATE GOODS (Supplying
manufacturers): textiles, building materials,
plastics, etc.
4. LABOR-INTENSIVE assembled products:
toys, sunglasses, etc.
5. TECHNOLOGY-INTENSIVE manufacturing:
nations (such as Mexico & Brazil) that have
moved beyond the developing stage are on the
way to becoming middle class economies; are still
manufacturing-focused
6. INNOVATION: Nations that improve, extend, &
perfect the manufacturing of products invented
by other nations (Japan, South Korea, Taiwan,
etc.)
7. INVENTION: Nations that invent products
which become major new global markets or even
new global industries (USA, Japan, Sweden,
France, etc.). This is the highest classification on
the VAC & generates the highest standard of
living.
HOPE ON THE
HORIZON FOR
DEVELOPING
NATIONS
1. 86% of the world's population is located in
developing countries, but because many of
these nations are beginning to develop a
middle class, thus making them “emerging
markets” with strong future potential for both
economic growth & business profit.
2. These emerging markets will be the key driver
of the global economy over the first half of
the 21st century.
3. If just 6% of the developing world succeeds
in achieving a annual income of $10,000,
350M people (more than the population of the
U.S.) will gradually become middle class
consumers.
1. U.S. corporations on the Standard & Poor’s
500-stock index generate 35% of profits from
foreign markets.
2. America’s General Electric projects that 66%
of its growth over the next decade (vs. just
20% over the past decade) will come from
emerging markets.
3. China’s Haier is currently the second largest
refrigerator company in the world; Mexico’s
Cemex is the third largest cement maker;
Turkey’s Koc group of manufacturing & service
companies grossed over $11B in 2003.
4. “Bollywood” (India’s movie industry) makes
over 4500 movies annually (vs. 1,200 for
Hollywood) & sells 12M movie tickets daily.
5. India’s Hindustan Motors Rural Transport
Vehicles (RTVs) are a big profit generator
because their versatile design (people
carriers, delivery vans, troop carriers, school
buses, ambulances, etc.) meets the needs of
multiple target markets.
6. China’s retail market has been growing 15%
annually for the past 20 years (with Nestle
being the only Western company among the
top 5 packaged goods companies in China).
7. America’s share of the Indian high-turnover
consumer goods industry is already $10B &
expected to double in the next decade.
8. Western Union has 225,000 outlets in
200 countries (including 21,000 in
China) for transferring funds
electronically (a highly profitable and
growing market, since emerging market
countries lack strong consumer banking
services).
9. Frito-Lay has experienced considerable
success marketing its Mexican Sabritas
brand to the U.S. Hispanic market.
10.Mexico's largest mortgage company
recently opened a New York office to
accommodate the number of work visa
Mexicans who want to wire money back
to relatives in Mexico.
11.More than 100 US. banks now accept
“matricula consular” identity cards for
Mexicans who want to open temporary
bank accounts.
12.Carnegie Mellon University is developing
a low cost ($250) wireless
communication device that combines
PC-TV-DVD-phone. It’s targeted for the
4B people in emerging markets who
make less than $2000 annually.
13.Consumer companies in China have
cashed in profitably on economical beds
& tables with built-in drawers.
14.Advanced Micro Devices has just
developed a $185 Personal Internet
Communicator (including monitor) that
is capable of connecting ½ of the global
population with Internet hook-up.
15.The Indian Institute of Science markets
the $200 “Simputer,” which uses a
stylus-based text system instead of a
keyboard.
16.India’s Grameen Bank (with a staff of
11,000) has made grassroots
“microloans” (small uncollateralized
loans to sole proprietor businesses) to
3M borrowers in 43,000 villages.
17.Makers of Islamic “halal” products
(consumer items with approved organic
ingredients similar to “kosher” products
in Jewish cultures) are experiencing
rapid growth via developing new food &
hygiene products not previously
available with halal standards.
18.India’s largest private bank, ICICI,
provides a vast array of financial
services (banking, insurance) & other
electronic services (games, e-commerce,
email, etc.) via computer kiosks in high
traffic retail areas.
1. Ready-to--eat meals to overcome lack of
refrigeration
2. Water purification systems
3. E-learning where business training
schools are scarce
4. Portable gas-powered generators where
electrical grids are weak
5. Retail kiosks where computers are
scarce
6. Waste recycling machines where trash
collection is poor
7. Proto-SUV vehicles where road
conditions are poor
THE GREATEST
RESOURCE IN
st
THE 21
CENTURY
WORLD
Throughout world history, women have always
been the most underutilized economic
resource. Not until the second half of the 20th
century were women in Western cultures
“liberated” to make major professional
contributions to economic development.
Slowly, but surely, a similar social movement
is underway in much of the developing world,
thanks in large part to digital technology
(computers, PDAs, cell phones, etc.)
undergirding female entrepreneurial activity.
Microloan businesses, free trade coops, &
cottage industries are ushering in a new era
of productivity in the developing world.
REGIONAL
ANALYSIS OF
DEVELOPING
NATIONS
THE RISE
OF
INDIA
1. India will likely become the world’s third
largest economy (after the U.S. & China)
by 2040, with a per capita income 20
times higher than today.
2. But today India struggles with underdevelopment, with 40% of the world’s
poor & second-largest HIV-positive
population.
3. India’s biggest assets are a strong,
entrepreneurial private sector, strong
democratic institutions, & a fast growing
service economy (due to Western offshoring).
4. India’s incredible ethnic & cultural
diversity (17 languages, 22,000
dialects, hundreds of largely
independent political entities) create a
huge problem to centralized economic
development. “But India can still
capitalize on its advantages: a vast,
growing economy, an attractive
political democracy, a vibrant model of
secularism & tolerance, a keen
knowledge of both East & West, & a
special relationship with America.”
5. India is currently the 12th largest
economy in the world with a per capita
income of $4, 542. Since 1990, India
has emerged as one of the wealthiest
nations in the world.
6. Two-thirds of the Indian workforce is
still agricultural, but numerous welleducated young workers are fueling a
boom in pharmaceuticals,
biotechnology, nanotechnology
(atomic-size technology applications),
& telecommunications.
RUSSIA’S FAULTY TRANSITION FROM
COMMUNISM TO CAPITALISM
The former Soviet botched its late 20th
century transition from Communism to
capitalism by abruptly converting from a
the government’s “command” pricing
approach to free market pricing
practically overnight. “The end result
was an enormous concentration of wealth
and a general understanding that the
process of privatization favored a small
group of investors. The outcome was
tragic for a large segment of the
population. ”
By 1996, Russia’s economy had
shrunk almost 36%; its infant
mortality rate soared & birth
rates fell below replacement
level; and wealth became highly
concentrated. Most Soviet
satellite nations experienced
income declines of 25% or more,
with 6 suffering a 50% income
decline. Two civil wars also broke
out.
NO LONGER A “COMMUNIST PARADISE”
1. Life is tough in post-Communist Russia
due to the economic & social chaos
caused by the overthrow of a totalitarian
system that is still searching for a viable
replacement. The “propellers” fell off the
old Soviet Union in mid-flight, & the plane
is now gliding without power.
2. Homelessness & runaway children has
reached epidemic proportions; the
Russian population is shrinking by
750,000 annually; alcoholism is rampant;
pessimism & cynicism are omnipresent.
WHY RUSSIA IS NOT DEVELOPING
1. No independent parliament
2. No independent judicial system
3. No independent media
4. State-influenced elections
5. Strong police state powers
6. Extreme state-business
collusion/corruption
THE ROUGH AND TUMBLE OF BUSINESS IN
RUSSIA
1. Systemic, ingrained lawlessness
due to centuries of bad
government: Throughout history,
Russia has been an orderly (via
dictatorial control), but lawless,
nation.
2. “Mutant capitalism”: An unholy
alliance between corrupt
government officials gangsters,
and industrialists
3. Government officials form
entrepreneurial networks with gangsters
to exploit business opportunities: import
bribes, money laundering, factory
licensing, illicit drugs, patent/copyright
stealing, etc.
4. Corrupt Russian government officials
sometimes suppress legitimate corporate
competition via dirty tricks (jailing
executives on false charges, forcing buyouts by state companies, etc.).
5. The Russian central bank borrowed tens
of billions of dollars from the IMF and
then laundered it in a shadow bank in
New Jersey to use in speculative bond
buying around the world.
6. Limited competition
between companies means
that the only way new
companies can get started is
to bribe their way in.
7. Bureaucratic working
environment: every minor
inefficiency is somebody’s
livelihood
8. Krisha (“roof”) infrastructure:
gangsters extort companies to buy
otherwise non-existent business
services (insurance, property
protection, access to govt. officials,
tax evasion, etc.) in exchange for 1020% of profits.
9. Reliance on bartering, IOUs and
counter trading to compensate for
Russia’s non-tradable ruble and lack
of legitimate money in circulation
PRAGMATIC ADVICE FOR DOING
BUSINESS IN RUSSIA
1. Avoid involvement in “strategic”
national industries such as natural
resources.
2. Don’t partner with former Communist
Party insiders who are probably corrupt.
3. Make friends in high places, such as
governors & mayors.
4. Look the other way at rigged elections &
other forms of institutional corruption.
The impersonal marketing approach of
Western capitalism (large self-service
retailers, massive advertising, credit card
purchasing, etc.) is poorly suited for
selling to the burgeoning populations of
developing nations. Affluent Westerners
have more wants than needs, while most
people in developing nations have way
more needs than wants. The 86 Percent
Solution: How to Succeed in the Biggest
Market Opportunity of the 21st Century (by
Ijay Mahajan and Kamini Banga) address
markeing strategy approppriate for
devleoping markets.
IRAQ’S CIVIL WAR CHAOS
The violence in Iraq comes from
multiple and conflicting directions:
small gangs of Sunnis and Shiites
killing each other in territorial-control
clashes; Baathists (former loyalists to
Saddam Hussein) and jihadists
attacking U.S. and Iraqi forces in a
more organized way; Sunnis fighting
with Kurds for turf in northern Iraq.
On top of all this, there is widespread
crime and corruption.
“Saddam Hussein and the Taliban ran cruel
dictatorships. But in uprooting them, the
West exposed deep tribal and sectarian
schisms, unleashing violent forces that the
dictators had kept in check and which could
not be reconciled simply by installing
democratic procedures. Although Afghans
and Iraqis voted eagerly for democratic
constitutions and new governments, these
governments are not working well. The
losers have not accepted defeat; meanwhile,
the winners, especially in Iraq, have
determined to take it all.”
1.
2.
3.
SUDAN & DARFUR
Black African & Arab tribal cultures meet in the
Darfur region of western Sudan (Northwest Africa).
The non-Arab black people (the Fur, Masalit, &
Zaghawa) have clashed throughout history with Arab
tribes (the Baggara). All of these tribes are Muslim.
In 2003-2003, Darfur’s non-Arab Muslim tribes
sought to secede (in protest against historical
mistreatment & discrimination) from the Baggarabacked Arab government in Sudan’s Khartoum. In an
attempt to quash the rebellion, the Arab government
armed ethnic Arab para-military death squads (the
“Janjaweed”) to pillage & “ethnically cleanse” nonArab Muslim rebel villagers.
300,000 people have been killed thus far in this civil
war & a more extensive civil war is imminent
between Sudan & neighboring Chad (where over
200,000 fleeing Darfuris have fled).
CIVIL WAR IN COLOMBIA
4. The Columbian army has unsuccessfully
battled with 2 different rebel groups for
nearly a decade.
5. The Revolutionary Armed Forces of Columbia
(FARC) is a Stalinist (Communist) guerrilla
army of 18,000 mercenary soldiers financed by
various drug lords in Columbia (who are in turn
financed by American drug users). FARC has
resorted to indiscriminate terrorist activities
(bombings, property destruction, & death
squads) in the attempt to demoralize
Columbians in their support of the national
army (which has dispatched 7000 soldiers to
deal with FARC).
6. The National Liberation Army (ELN) is
Columbia’s second guerilla group also backed
by drug lords seeking to control the nation’s
political terrain.
7. Various right wing para-military squads have
been organized by major Columbian land
owners to protect their property from civil war
fallout.
8. The U.S. has also fielded intermittent military
campaigns in Columbia to stem the flow of
drugs & to stabilize the national army’s
counter-guerilla activity.
9. Columbia produces 90% of all the cocaine
consumed in America (the world’s most
voracious drug user) & is a major supplier of
heroin & marijuana.
1.
2.
3.
4.
5.
6.
MAJOR DRUG-PRODUCING
DEVELOPING NATIONS
Cocaine: Columbia (#1), Peru (#2),
Bolivia (#3)
Opium (heroin): Afghanistan (#1),
Burma (#2), Mexico, Azerbaijan
Marijuana: Mexico, Columbia,
Afghanistan, Azerbaijan, USA
Hashish: Morocco, Syria
Methamphetamines: Burma (& USA)
Synthetic drugs: Belgium, Poland, (&
USA)
CIVIL WAR IN SRI LANKA
1. The island of Sri Lanka, south of India, has a
decade-long civil war between the majority
Buddhist Singhalese & the minority Tamils
(about 8% of the island’s population) who
occupy the Jaffna peninsula (which they call
Eeslam) on the NE part of the island. Muslims
make up another sizable minority group who live
in the NE sector of the island & tend to side with
the Singhalese.
2. The Tamil Tiger rebel group has waged a bloody
terrorist campaign (of 60,000 violent casualties)
seeking Tamil independence in Eeslam. They are
bitter about social & economic discriminatory
behavior by the Singhalese, including making
Singhalese the official language of Sri Lanka.
CIVIL WAR IN CYPRUS
1. The island of Cyprus south of Turkey is
partitioned into 2 nations, one officially
recognized by the world (the Republic of
Cyprus, an EU member), & the other not
recognized (the Turkish Republic of
Northern Cyprus).
2. When a Greek military junta in the late
1960s took over Cyprus by coup, Turkey
also invaded, securing 37% of the island
& engaging in ethnic cleansing of the
indigenous Greek Cypriot population.
3. 8 years of subsequent political
negotiations failed to solve the island’s
bifurcation, prompting Turkey to form the
“rump” Turkish Republic.
CIVIL WARS IN
EASTERN EUROPE
1. 9 civil wars, based mainly on historically
deep ethnic/religious tensions, erupted in
1991-1995 after the dissolution of
Communist rule, splitting former
Yugoslavia & Czechoslovakia into 7 new
nations: Bosnia/Herzegovina, Croatia, the
Czech Republic, Macedonia, Serbia,
Slovenia, & Slovakia
2. In the worst of these conflicts, historically
Christian Serbs sought to expand its
borders at the expense of Muslim
minorities in bordering nations.
3. Serbia attempted to carve out a new nation
for Serbs out of the borders of Bosnia &
Croatia, nations with large Serb minorities.
This Serbian campaign sought to remove all
non-Serbs (mainly Muslims) from the
enlarged Serbia through summary
executions, terror, & forcible expulsion.
4. Hundreds of thousands of Muslim Albanians
died and millions were displaced.
5. This civil war of “ethnic cleansing” was
eventually brought to a violent end when
NATO (military partnership between the
USA & the EU) launched heavy bombing
raids against the Serbs.
AFRICAN CIVIL WARS
1. Massive colonialization of Africa by Europe
over the past 150 years rearranged
ancient African tribal boundaries, plunging
much of continent into civil wars over the
past 50 years when European nations
withdrew.
2. In 1884, a meeting of European colonial
powers was hosted in Berlin to plot out
the final game plan for the final take-over
phase of African territory. By the end of
the 19th century, all African nations (9
million square miles) had been colonized,
except for Liberia & Ethiopia.
3. Rwanda (former Belgian colony):
Possibly 2/3 (800,000) of the Tutsi
population was exterminated in the
1990s by their age-old economic
rivals, the Hutu.
4. Sierra Leone: The Revolutionary
United Front (RUF) repeatedly clashed
with different dictatorships during the
1990s over diamond mining profits.
Child soldiers have been aggressively
recruited by both sides. UN peacemaking efforts have made some
progress.
5. Congo: Four million people (half of them
children) have died since 1998 in a complex
multi-tribal civil war involving the
governments of Congo (formerly Belgian
Congo, then Zaire), Uganda, & Rwanda. At
the peak of the civil war, an average of 1250
people died every day (2 children per
minute) from mostly preventable causes.
30,000 children have been forced into rebel
militia groups or into toxic diamond & gold
mines.
6. Ethiopia vs. Eritrea: On and off again civil
war (with hundreds of thousands of
casualties) since the 1990s over Eritrea's
secession from Ethiopia (North Africa)
1. British colonies (30% of Africa's population):
Botswana, Gambia, Ghana, Guyana, Kenya,
Sierra Leone, South Africa, Somali, Sudan,
Uganda, Zambia, Zimbabwe
2. French colonies (15% of population): Algeria,
Benin, Burkina Faso, Chad, Comoros, Congo,
Djibouti, Gabon, Guinea, Ivory Coast,
Madagascar, Mali, Mauritania, Morocco, Niger,
Senegal, Tunisia,
3. Germany (9% of population) : Burundi,
Cameroon, Namibia, Rwanda, Tanzania,
Togoland
4. Spain: Western Sahara, Guinea Belgium:
Rwanda
5. Italy: Eritrea, Somalia
6. Portugal: Angola, Guinea-Bissau, Mozambique
7. Belgium: Congo
ISREAL & THE PALESTINIANS
1. During the “Six-Day War” of 1967, Israel
expanded its borders (in an effort to
establish a safe buffer zone between itself &
hostile bordering Arab nations) by taking the
following territories from Egypt, Jordan, &
Syria: the West Bank, the Gaza Strip, East
Jerusalem, & the Golan Heights.
2. The Muslims living in these regions lost their
nationalities & citizenships & have been
referred to since simply as “Palestinians.”
3. The Palestinians have struggled to form their
own nation state in a process fraught with
terrorism, violence, & America's military &
economic backing of the Israelis.