Emerging Countries Benefit at the Expense of Industrial Countries
The world’s newly industrialized countries (NIC) are the focus of the majority of today’s growth, especially among major industries, according to global trade credit insurer Euler Hermes.
Paris (PRWEB) November 18, 2005
The world’s newly industrialized countries (NIC) are the focus of the majority of today’s growth, especially among major industries, according to global trade credit insurer Euler Hermes. Meanwhile, the so-called already industrialized countries (AIC) are seeing either very weak growth (Europe) or growth that is artificially sustained by a fall in household savings and a gigantic current account deficit (United States).
A recent international forecast by market sector shows that the AIC only owe their growth to a few industries that are protected from global competition, such as the aeronautics and automotive fields. In other industrial sectors, Euler Hermes sees a rapid migration toward the NIC.
--Textiles and Electronics migrate to emerging countries with low wage bills
Having topped 4% in 2004, world growth is expected to drop back to 3% this year and 2.8% next year. This slowdown remains controlled and has affected geographic regions and sectors to differing degrees. The emerging countries, chiefly China, are continuing to grow at a very steady pace. This growth is especially underpinned by very rapid expansion of the local consumer goods industry, whether traditional (textiles) or more technological (mass market electronics). It is responding to rapid growth in demand due to the maintenance of strong consumption in the United States and large market share gains by the NIC, especially in Western Europe. Thanks to ever easier global trade, investment in capacity is being channeled from western countries to regions with low wage costs (the hourly industrial wage in China is around $1.17 compared to $21.03 in the United States and $29.21 in Europe).
--Iron & Steel and Cars: the industrialized countries are just as weakened in downstream manufacturing.
The emerging countries are developing a significant industry in intermediate goods, especially in iron and steel, and they have established production capacities that exceed local processing industry needs.
The unprecedented explosion in steel prices in 2004 enabled all producers to increase their profitability, and restructure and consolidate their business. A relaxation of prices in the first half of 2005 (down 25% compared with the highs of 2004) provided the opportunity to a number of steelmakers to relocate production to the highest growth areas where raw materials are more accessible (mainly Asia or South America). But can the current reduction in prices be sustained? The answer to that will probably come from China, the world’s leading producer but also – and this is a new feature – a net exporter of steel since the end of 2004, which has generated a back-track in steel prices (an annual average fall of 17% from 2006 is now anticipated).
--Despite the sector’s healthy state, the main European and American car manufacturers are faced with ever-increasing competition from the emerging countries.
The AIC – the United States, Western Europe, and Japan – are maintaining a dominant position in the car manufacturing sector, but this is being increasingly challenged by new low-production-cost regions (Latin America, Asia, Eastern Europe). U. S. carmakers and equipment manufacturers are mired in difficulties, while the situation of French and German manufacturers, which even last year was still good, is deteriorating. Japanese carmakers are the principal beneficiaries, but so are sub-contractors in emerging countries. By 2011, global automobile production is expected to see growth of 23% compared with 2004, 80% of which will be due to emerging countries (China, India, Indonesia, Iran, Malaysia, the Philippines, South Africa, Taiwan and Thailand).
--Aeronautics, Construction are underpinning the AIC’s resistance
Strongly destabilized upstream (intermediate goods) and downstream, the AICs only owe their survival to good performance by the pharmaceutical and aeronautical industries (better protected by the entry barrier created by their past investment in research), capital goods, and sectors protected from international competition (distribution and construction).
--The new aeronautics operators want to share in the strong growth, despite the technological and financial entry barriers put up by the historic players.
The good state of the global aeronautics industry largely benefits the United States and Europe, which account for 80% of global sales. Nevertheless, the heavy competition that airlines are currently indulging in (cost reductions, aggressive sales policies) are pushing sector players to become increasingly international in the context of a sharp upturn in orders and deliveries (a 40% increase in Airbus and Boeing deliveries through to 2007), which is benefiting a number of countries like Japan, China and even Russia, and could further feed their ambitions in this area.
-- Construction is an essential growth driver in Spain, the United States and France, but is having difficulty picking up in Japan and Germany.
Even though construction is in a healthy state in the industrialized countries – with the USA, Japan and major European countries remaining the principal markets overall – the sector’s growth vectors are primarily in the emerging countries: Asia (excluding Japan), Eastern Europe, the Middle East and Africa are expected to record over 3% annual average growth for the period from 2003 to 2014.
Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 40 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 1.9 billion euros in 2004. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www. eulerhermes. com/usa (http://www. eulerhermes. com/usa).
Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor’s rates the group and its principal credit insurance subsidiaries AA-.
Euler Hermes ACI (North America) :
Rick Ostopowicz : (410) 753-0652
Rick. ostopowicz@eulerhermes. com