Global Investor 2.

13, November 2013

Expert know-how for Credit Suisse investment clients

New Mobility
Easing global gridlock
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 GLOBAL INVESTOR 2.13 Editorial—03

Photos: Chou Chiang | Martin Stollenwerk

At certain moments in history, a cluster of innovations reaches a point

of maturity and comes together to create radical change. Steam
power, railways and the assembly line came together in the mid-19 th
century’s wave of industrial globalization. After World War II, efficient
air-conditioning, electricity grids and cold-chain logistics triggered a
US productivity boom as factory conditions improved, and allowed
rapid development of the US Sun Belt and then Asian hubs such
Responsible for coordinating the focus as Singapore and Hong Kong. Typically, these clusters occur when
themes in this issue: new technologies combine with relatively old ones to create something
Nilanjan Das, CFA , is Research Editor radically new that is greater than the sum of the parts.
of Global Investor and Head of Global Today, we see three such clusters, all related to mobility. First,
Research KPO. He leads a cross- low-cost Internet-based communications like Skype and cheaper
asset research team covering global money transfers combine with the existing technology of long-haul
equities, bonds, currencies, economic air travel to transform the concept of immigration from the old model
and thematic research. He joined of lifelong change requiring permanent separation from friends and
Credit Suisse in 2009, bringing 15 years family, into a temporary, intermittent activity in which close contact is
of research and banking experience, maintained with home. Second, the application of modern information-
including positions at J. P. Morgan Global based control systems to relatively old automotive and bicycle technol-
Research and ICICI Bank. He is a ogies presages a revolution in urban and eventually interurban trans-
postgraduate from the Indian Institute port. And a third is waiting in the wings: the explosion of Internet-based
of Management, Bangalore. learning can help social mobility, for which education is key.
Sara Carnazzi Weber joined Credit In this issue, we examine how this New Mobility is set to transform
Suisse in 1999 and is currently a senior economies, lives and social interactions around the world. These ef-
economist responsible for long-term fects may prove vital in emerging countries, where trend economic
macroeconomic issues. She has growth seems to have slowed. Lack of infrastructure, income uncer-
ten years of experience in regional and tainty and in some cases labor bottlenecks are all possible causes.
spatial economics and contributed The New Mobility offers some potential solutions, reducing the scale
significantly to the development of the of physical infrastructure investment needed to relieve urban gridlock,
regional analysis unit within Research. supporting consumption by opening new income streams from migrant
She holds a doctorate from the workers, and upping temporary labor supply in countries facing short-
University of Fribourg. ages. Those countries that embrace these solutions will benefit from
a new potential way to reinvigorate growth.

Giles Keating, Head of Research and Deputy Global CIO

GLOBAL INVESTOR 2.13 Contents—04

TECHNOLOGY
ENABLERS

MODERN FUTURE OF
MIGRATION MOBILITY

SOCIAL/POLITICAL
DRIVERS

If there’s one constant when it comes to human nature and activity, it’s the
fact that we’re perpetually on the move – whether it’s the search for
safety and security as millions flee war-torn regions of the world,
the hope for a brighter economic future elsewhere, simply
trying to make sure we get through the morning
commute without being delayed, or making
a concerted effort to climb the rungs
toward a higher standing within
the social order.
> Pages 08, 18, 30, 44

New Mobility
06
The New Mobility
Information technologies are reconfiguring the way we travel,
work and communicate. Giles Keating explores how the New
Mobility will impact economic growth.
10
Migration: Good or bad ?
Is international migration posing a problem, or rather a solution?
Ian Goldin separates fact from fiction, providing a deeper
understanding of a complex topic.
14
Top shots on the move
Global Investor presents a collection of portraits featuring ten
top shots from around the world. Find out where they are
from, and where they are deployed. Each is unique, but what
is it that they all have in common?
20
Keeping cities moving
According to Dario Hidalgo, as cities continue to expand,
the need for effective mass rapid transit becomes all the more
important. He explains why more roads aren’t the answer.
24
So far, yet so near
With over a billion smartphone users, mobile technologies are
already transformative. But, says Uwe Neumann, the real boom
comes once people, processes, things and data are all linked.
26
Innovation welcome in a USD 40 billion business
Remittances from migrants to their home countries have a
major economic impact. Christine Schmid and Javier Lodeiro
explain why and look at the role that mobile communication
technology plays in getting money to those who need it most.
32
Moving ahead in Africa
Where 40% of primary school students drop out,
there’s a need for more accessible education in Africa.
But as Pedro Conceição reports, learning and earnings
aren’t always directly linked.
GLOBAL INVESTOR 2.13 Contents—05
36
(Un)equal opportunity
Earnings mobility is something that citizens of all the rich
countries value. Miles Corak examines the roles that socio-
economic background and education play in that regard.
38
Managing migration
National migration policies are a complex matrix where demo-
graphics and economics intersect. Martina Lubyová explores
the topic of managing labor mobility in a globalized world.
46
New mobility models needed
Urban streets are chronically congested, slowing commuters
and goods while choking residents with pollution.
Andrea Schnell and Thomas Rühl present some new solutions
to what has become a long-standing problem.
50
How ideas spread
If there’s something worth sharing, Duncan Watts wants to
know about it. He’s made a career of studying how and why it
is that some ideas get passed up, passed along or “go viral.”
52
The China travel surge
Tourism from China is booming – to such a degree that
China plans to build 70 new airports by 2015 . Scott Booker
reports on the travel explosion that was worth USD 102 billion
last year.
Disclaimer > Page 56
Podcast on www.credit-suisse.com/globalinvestor
 Introduction

MOBILE LIVES

The New
Mobility
The information revolution is opening up new ways to leverage the “old” economy.
New control systems ease traffic on congested highways, teaching
expands beyond the classroom, family ties are no longer broken by distance.
Does this offer hope for improving the disappointing growth rates
now affecting both developed and emerging countries?
TEXT Giles Keating, Head of Research and
Deputy Global CIO, Credit Suisse

The digital technologies are starting to transform mobil-
ity, affecting people, traffic and ideas. First, new cheap
ways to transfer small sums of money across borders and
almost free international communication (Skype, Face-
book ...) are now combining with low-cost long-haul air
travel to change mass migration from the traditional
model of lifelong upheaval to a new era in which mass
migration can be temporary, and close contact with home
is retained. Second, the application of modern informa-
tion-based control systems to the old technologies of
automobiles, bicycles and public transport promises a
revolution in urban and eventually interurban transport,
squeezing far more passenger journeys from existing over-
stretched infrastructure. Third, Internet-based learning,
still in its infancy but growing rapidly, has the potential
to reach vast numbers of people, greatly magnifying the
social mobility that education brings. Taken together, we
call these three phenomena “The New Mobility.”
The changing shape of migration is difficult to measure
directly, but some telltale indicators give an idea of what
is happening. In the Philippines, one-tenth of national
income is now earned abroad and sent home to help sup-
port children and other family members. Much of this
money seems to come from people who have traveled
abroad to work temporarily rather than permanently, in
places such as Hong Kong, Singapore and the Gulf. Javier
Lodeiro and Christine Schmid analyze the growth of these
money flows on page 26.
Large numbers of people also travel from the former
Soviet Republics to get temporary work in Russia. As an
example, in Tajikistan this brings in income worth almost
half of domestic output, the world’s highest figure. Mar-
tina Lubyová (page 38) provides color on both the benefits
and problems faced by Russia as it receives these large
numbers of temporary workers. Gulf states Dubai and
Qatar rely heavily on temporary workers from the sub-
continent to fuel all levels of their economy from construc-
tion and domestic service to fund management, while,
within Europe, London is a clear temporary migration
hot spot.
Modern telecommunications ease pain of leaving home
Physical separation from family and friends will always
be an issue, but modern telecommunications mitigate its
effects substantially. Long-distance international phone
calls now cost pennies – barely two decades ago, they were
an almost unaffordable luxury for people on low incomes.
And seeing people at a distance, largely the preserve of
expensive corporate videoconferences ten years ago, is
now available via Internet street cafés across emerging
countries using Skype, while low-end cell phones help
spread messaging systems like WhatsApp (which send
text, photos and audio clips) toward the lower end of the
income scale. Arguably, the impact of these changes in
boosting temporary migration is only just beginning.
“Physical separation
from family and friends will
always be an issue, but
modern telecommunications
mitigate its effects
substantially.”
Going abroad to work for a while can bring substantial
economic benefits. For example, in the Philippines, in-
come from abroad has risen consistently for 15 years, pro-
viding support even when the domestic economy was slow-
ing down. Of course, there are adverse effects as well, and
both good and bad effects have been widely analyzed for
traditional (permanent) migration, as described by Profes-
sor Ian Goldin in his excellent article on page 10. The
newer phenomenon of temporary mass migration is clear-
ly more flexible and so should be able to offer a better
balance of good effects compared to bad. We believe that
it will grow in scale, as the cost of sending money home
falls further, cheap airfares proliferate, and services like
Skype become even more widely used.
A need for multimodal transit and smarter planning
Urban transport is starting to be reshaped by information
technology. Automated bicycle rental is now commonplace
in many cities around the world (see just one example on
page 23). Remote-controlled lanes for cars and other ve-
hicles are set to move from the lab to public roads within
the next few years; smartphone apps already allow pas-
sengers to see when their bus is arriving and to identify
the nearest taxi. And in future, the boundary between
buses and taxis may become blurred, with a unified ve-
hicle fleet able to switch between shared and exclusive use,
and between fixed and variable routes, depending on de-
mand. Andrea Schnell and Thomas Rühl review these de-
velopments (page 46) while Eric Höweler (page 49) dis-
cusses their application to interurban travel. With traffic
in cities such as Jakarta, Beijing, Mumbai and Manila
clearly a major constraint on economic growth and high-
ly pollutive, and mass transit systems expensive and dis-
ruptive to build, a new approach is badly needed. Cost-
effective solutions such as bus-ways (see the interview with
Darío Hidalgo on page 20) can help, but a broader solution
is to use information technology to increase the passen-
ger-carrying capacity of a given road system. This has the
potential to be far cheaper and less disruptive than mas-
sive physical construction programs.
Education is often seen as key to social mobility, but
this does not apply everywhere. Miles Corak (page 36)
shows that poor education often persists across gen-
erations in developed countries, while Pedro Conceição
(page 32) shows that in sub-Saharan Africa, education does
not necessarily mean getting a job. Could the New Mobil-
ity help? It could allow adults to use Internet learning to
catch up on skills they missed at school, and it could help
educated young Africans to find worthwhile work abroad
for a while, without having to leave home permanently.
Already, Internet-based learning is growing rapidly. Lec-
tures by professors from top universities are now available
to a worldwide audience and online courses like those
offered by Rosetta Stone provide an intuitive and yet rigor-
ous way to learn new languages. Even social networks play
a role, complementing formal education by spreading key
ideas, as analyzed by Duncan Watts (page 50).
Economic growth has slowed recently in many emerg-
ing countries and their stock markets have seen periods
of major underperformance. The New Mobility may help
offer solutions. It can bring relief to the urban gridlock
that is inhibiting development; it can help to boost con-
sumption by opening new income streams from local
people who are temporarily working abroad, while boost-
ing labor supply in other places where it is needed; and it
may also be able to help relieve educational bottlenecks.
All this can be helpful for growth in developed countries
as well. Crucially, it is not just that the technologies are
there to do this; it is also that the economic incentives to
apply those technologies are rising. ●
Giles Keating is Global Head of Research and Deputy
Global CIO for Credit Suisse. His team conducts the
fundamental research key to the investment process
for Credit Suisse clients. As Deputy CIO he plays
a core role in those investment decisions. He joined
Credit Suisse over 25 years ago and has degrees
from the London School of Economics and Oxford,
where he is an Honorary Fellow. He is chair of
Tech4All and techfortrade, charities aiming to reduce
poverty via use of technology.
 3,000,000

13,000,000
people
2,000,000

Chapter I 1,000,000

MODERN 500,000

MIGRATION
The arrow’s width shows the
number of people who have migrated
from one country to another

INTERNATIONAL
MIGRATION FLOWS
Immigration remains a hot political topic, though only 231 million
In 2013, 231 million people worldwide
people, representing 3.2% of the world’s total population, had left their country of origin
are living outside their country of origin. In absolute terms, and emigrated, with the USA being
however, their figure has increased by 50% since 1990. their preferred destination. The
USA is home to nearly a fifth of the
world’s international migrant stock.

Source: UN DESA
Migration: Good or bad?
page 10
The Silicon Valley advantage CANADA
page 13

50

5 10 TORONTO
NEW YORK
USA WASHINGTON DC
SAN FRANCISCO
Immigrants
CHICAGO
in millions, 2013 LOS ANGELES
DALLAS
TOP 10 IMMIGRATION HOUSTON
COUNTRIES OF THE WORLD MIAMI
MEXICO

USA 45,785,090
RUSSIAN FEDERATION 11,048,064
GERMANY 9,845,244
SAUDI ARABIA 9,060,433 CHICAGO
UNITED ARAB EMIRATES 7,826,981 Cities with 1 million or more
UNITED KINGDOM 7,824,131 foreign-born residents

FRANCE 7,439,086
CANADA 7,284,069 HOT SPOT MIGRANT
AUSTRALIA 6,468,640 CITIES OF THE WORLD
SPAIN 6,466,605
The points on the map are the cities USA
attracting one in five of the world’s Population: 320,051,000
15
immigrants. Combined, these Immigrants: 45,785,090
metropolitan areas have 37 million 14.3% of population
5 foreign-born residents. Migrant native countries
MEXICO 12,950,828
CHINA 2,246,840
Emigrants INDIA 2,060,771
in millions, 2013 PHILIPPINES 1,998,932
CHICAGO USA PUERTO RICO 1,685,015
DALLAS USA VIETNAM 1,381,076
TOP 10 EMIGRATION EL SALVADOR 1,371,767
COUNTRIES OF THE WORLD DUBAI United Arab Emirates CUBA 1,201,164
HONG KONG China
HOUSTON USA
INDIA 14,179,627
JIDDAH Saudi Arabia
MEXICO 13,201,181
LONDON United Kingdom
RUSSIAN FEDERATION 10,820,372
LOS ANGELES USA
CHINA 9,333,211
MELBOURNE Australia
BANGLADESH 7,725,622
MIAMI USA
PAKISTAN 5,617,297
MOSCOW Russia
UKRAINE 5,552,689
NEW YORK USA
PHILIPPINES 5,491,607
PARIS France
AFGHANISTAN 5,102,409
RIYADH Saudi Arabia
UNITED KINGDOM 5,005,941
SAN FRANCISCO USA
SINGAPORE Singapore
Source: UN DESA SYDNEY Australia
TORONTO Canada
WASHINGTON DC USA

Source: MPI
 UNITED KINGDOM GERMANY
Population: 63,136,000 Population: 82,727,000 MIGRATION IS ON THE RISE
Immigrants: 7,824,131 Immigrants: 9,845,244
12.4% of population 11.9% of population
Migrant native countries Migrant native countries The stock of international migrants has increased by 50% since 1990. The number
INDIA 769,540 TURKEY 1,543,787 of migrants rose by 77 million between 1990 and 2013, from 154 million to
POLAND 687,444 POLAND 1,146,754 more than 231 million, with Southeast Asians and Southern Africans most likely
PAKISTAN 405,878 RUSSIAN FED. 1,007,536
IRELAND 360,263 KAZAKHSTAN 717,753 to leave their home country.
CHINA 330,659 ITALY 433,127
GERMANY 315,024 ROMANIA 383,626
SOUTH AFRICA 258,990 GREECE 238,220
BANGLADESH 207,915 CROATIA 233,064 International migrant stock as a percentage of the total population

SINGAPORE SWITZERLAND NEW ZEALAND USA ITALY

43
40 %
29
30 %
25
LONDON MOSCOW
20 %
PARIS 14
10 % 9

0%
1990 2000 2010 2013

Source: UN DESA

RUSSIAN FEDERATION

UNITED
KINGDOM

POLAND
GERMANY
UKRAINE
KAZAKHSTAN
SWITZERLAND
FRANCE

SPAIN
TURKEY

CHINA
AFGHANISTAN
JORDAN
PAKISTAN
UAE
BANGLADESH
SAUDI HONG KONG
ARABIA INDIA

PHILIPPINES

SINGAPORE

SAUDI ARABIA
Population: 28,829,000 AUSTRALIA
DUBAI Immigrants: 9,060,433
31.4% of population
RIYADH Migrant native countries
INDIA 1,761,857 SYDNEY
JIDDAH PAKISTAN 1,319,607 MELBOURNE
BANGLADESH 1,309,004
EGYPT 1,298,388
PHILIPPINES 1,028,802
YEMEN 461,042 NEW ZEALAND
INDONESIA 379,632
SUDAN 234,564

> 20% 10 –20% 1–10% < 1%

International migrant stock as a

percentage of the total population

INTERNATIONAL
MIGRANT STOCK AUSTRALIA
Population: 23,343,000
Immigrants: 6,468,640
More than a fifth of the population 27.7% of population
in Australia, Saudi Arabia, the United Migrant native countries
Arab Emirates, Kuwait, Kazakhstan UNITED KINGDOM 1,277,474
NEW ZEALAND 582,761
and Switzerland are non-nationals. CHINA 447,407
INDIA 364,764
ITALY 231,650
Source: UN DESA VIETNAM 225,749
PHILIPPINES 189,969
SOUTH AFRICA 166,731
GLOBAL INVESTOR 2.13 —10

MOBILE POPULATIONS

MIGRATION
GOOD OR
BAD? Throughout history, migration has always been the most important driver of human
progress and dynamism. Indeed, economic evidence indicates that migration helps economies,
both in the developed and developing world. Yet arguments around migration are
often driven by fear rather than facts. Ian Goldin brings a nuanced view to a complex topic.
TEXT Ian Goldin, director, Oxford Martin School, University of Oxford

We live in an era of two competing narratives. The first suggests that
migrants are flooding across our borders, and that they are stealing
jobs and eroding our country’s social fabric in the process. Alterna-
tively, the second argues that in spite of minor short-term dislocations,
international migration is a boon: it generates innovation and dynamism
while fueling long-term economic growth. My view is that both of
these caricatures are too simplistic. The costs of migration are felt in
the short term and are local, so they have real social and political
consequences, while the benefits are more diffuse and longer term.
As with debates on trade, where protectionist instincts tend to over-
whelm the longer-term need for more open societies, the core role
that migrants play in economic development is often overwhelmed by
defensive measures to keep migrants out. The economic evidence is
clear: migration helps economies, both in the developed and develop-
ing world. As is the case with trade and in the realm of the free flow
of ideas, shutting ourselves off from each other is harmful.
More people, more borders
Globally, the estimated 231 million migrants in the world make up
about 3 % of the world’s population. Before passports became wide-
ly adopted about 100 years ago, and particularly in the age of mass
migration of the 19 th century, up to one -third of parts of Europe
emigrated and over a quarter of the population of the USA were im-
migrants. While the share of our societies that are migrants may well
be lower today than in previous centuries, the number of migrants
has certainly grown. In part, this reflects the fourfold increase in
the number of independent countries over the past 100 years. This
proliferation means that people who previously moved within a coun-
try – such as the Soviet Union – are now recorded as migrants. But
not only has the number of countries quadrupled over the past cen-
tury, so too has the number of people to more than seven billion
people. More borders and more people result in more migrants, even
if their relative contribution to our populations or economies declines.
At the end of 2012 , three out of four migrants live in a small group
of 24 countries, with the USA being the most significant home for
migrants. Approximately 70 million migrants have migrated from one
developing country to another, and approximately 65 million have gone
from developing to richer countries, with about 55 million migrants
having moved between the different OECD countries, and a rapidly
growing number – currently around 20 million – having left the OECD
for emerging markets, where job opportunities are multiplying most
rapidly. The European Union is the world’s largest experiment with
visa-free labor migration. Even though emigration from compara-
tively less rich countries such as Romania and Poland was substantial,
Germany, Italy and the UK were both leading sources and leading
recipients of migration. The main lesson from Europe is how few
people migrate, with migration levels seldom much higher than those
in the periods when greater restrictions applied. Given the levels of
youth unemployment of over 50 % in Greece and Spain, it is remark-
able that so few young people have migrated. This highlights how the
arguments around migration are often driven by fear rather than facts.
Opportunities regarding employment as well as housing and other key
determinants of demand are at least as important as the supply-side
push factors that contribute to migration.
Why do they go?
It is dangerous to generalize about migration. Of the annual flow of
around 15 million migrants, most fit into one of four categories of
GLOBAL INVESTOR 2.13 —11
Ian Goldin is Professor and Director of the Oxford Martin
School and Professor of Globalization and Development
at the University of Oxford. This article draws on his widely
acclaimed book “Exceptional People: How Migration
5JCRGF1WT9QTNFCPF9KNN&GƟPG1WT(WVWTGqRWDNKUJGF
by Princeton University Press in 2012.
cross-border movement: economic, student, social and refugee/asy-
lum. There are around 5 million economic migrants each year. High-
skill migrants bring special talents or training across borders to fill
gaps in the native workforce. Low-skill migrants tend to fill short-
ages in physical labor or jobs that are less desired by the native labor
force. About 3.5 million students migrate each year. While some
countries, such as the UK , insist that students leave, others such as
Australia and the USA have gained talent by allowing certain students
to stay. For example, 68 % of foreign students who received doctor-
ates in the USA in 2000 were still there five years after graduation.
Social and family reasons account for about 2 million migrants a year,
as individuals and families aim to be reunited with loved ones. This is
most common in the nations built largely by more recent generations
of immigrants (the USA , Canada and Australia) as well as the former
colonial empires (especially the United Kingdom and France). Conflict
and persecution push people from their homes and across borders.
Refugee and asylum seekers account for an average of about two
million migrants per year. At the end of 2012 there were 15.4 million
officially recognized refugees worldwide, with 80 % of these refugees
hosted by developing countries, up from 70 % ten years ago. It is
impossible to know how many undocumented migrants there are
in the world, but in the USA the estimates are that there are about
11 million out of a total number of around 50 million migrants, or about
22 % of the total.
By the mid-1990 s, more than 30 % of documented migrants into
the USA were highly skilled. Similar trends exist in Europe. Germany
launched a “green card” program in 2000 to entice workers to fill gaps
in labor, particularly in healthcare and information technology. Concur-
rently, France worked to attract scholars, scientists and computer
professionals. As a result, the percentage of skilled migrants into
EU countries climbed from 15% in the early 1990 s to 36 % in the >
GLOBAL INVESTOR 2.13 —12

original 14 EU countries by 2011. This increase in high-skill labor

movement reflects the priorities of business. Firms recognize that “The European
Union is the world’s
they are engaged in a war for talent with their competitors. Govern-
OGPVUVJCVCTGOQTGQRGPVQOKITCVKQPCUUKUVVJGKTƟTOUKPCOWVWCNN[

largest experiment
beneficial arrangement. Firms are more agile, adaptive and profitable.
Governments receive more revenue and thrive off the dynamism that

with visa-free
high-skilled migrants bring. Yet it is not only higher-skilled migrants
that are vital. In the USA , unskilled migrants are an essential part of
the construction and services sector. In the Middle East, the success
of Dubai or other emirates and Qatar rests on over 90 % of the labor
force being skilled and unskilled migrants.
labor migration.”
Debunking migration myths

If migrants play such a vital role, why is there so much concern? The
first myth is that migrants take jobs and destroy economies. The truth
is the opposite: migration makes economies more dynamic, creates
jobs and sparks long-term growth. In the USA , migrants have been
founders of companies such as Google, Intel, PayPal, eBay and
Yahoo. In fact, skilled migrants account for over half the Silicon Valley
start-ups and over half of patents, even though they are around 15%
of the population. There have been three times as many immigrant
Nobel laureates, National Academy of Science members and Acad-
emy Award film directors than native ones. Such anecdotal results
are echoed systematically on a large scale. Research at the Federal
Reserve Bank of San Francisco recently concluded that “immigrants
expand the economy’s productive capacity by stimulating investment
and promoting specialization… This produces efficiency gains and
boosts income per worker.” Research on the net fiscal impact of the
immigration of Polish, Czech and other migrants to the UK from the
ten countries that joined the European Union in 2004 showed that the
migrants contributed “significantly” more in taxes than they received
in benefits and services. On a global scale, according to the World
Bank, increasing migration equal to 3 % of the workforce in developed
countries between 2005 and 2025 would generate worldwide eco-
nomic gains of USD 356 billion. Some economists predict that if
borders were completely open and workers were allowed to go where
they pleased, it would produce gains as high as USD 39 trillion for >
continued on page 16

Historical overview of migration flows

The infographic below depicts a number of migratory trends throughout
the 20th century. Both the source and target destination are shown.
The reasons are varied, but economic, conflict and social migration were
the primary drivers of these migratory trends. Source: BBC

1918 –1919
Eastern Europe to
USA and Canada

1918 ­
Britain to Australia,
South Africa and
New Zealand

1939 –1940
Russia to Siberia 1950 ­
Mexico and
1940 ­ Central America
European Jews to USA
to USA
1950 –1960
1945 ­ North Africa 1973 ­
Turkey to Germany to France, Ugandan Asians to UK
Spain and Italy
1947 ­ 1975 ­
India, Pakistan and 1950 –1960 Vietnam to Malaysia,
Sri Lanka to UK West Indies to UK Australia and USA
 GLOBAL INVESTOR 2.13 —13

MICROECONOMIES

The Silicon Valley

advantage
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TEXT Vivek Wadhwa, VP of innovation and research, Singularity University, Mountain View, CA

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 TOP SHOTS ON THE MOVE WHERE DO
THEY COME FROM? WHERE DO THEY GO?
At first glance, the individuals below appear to have nothing in common other than their impressive titles. Take a closer look.
All of them are well or extremely well qualified and seven out of ten have a multinational and/or a multilingual background.
With organizations becoming ever more global, managers with strong educations and cross-cultural networks
are more mobile and in greater demand – than ever. Place of birth Place of work
Photos: Bain & Co, Deutsche Bank, Newscast, Nokia, Stéphane de Bourgies, PepsiCo, Nestlé, ABB, Anheuser-Busch InBev ®, Coca-Cola

BAIN & CO DEUTSCHE BANK

Orit Gadiesh, an Israeli-American Anshuman Jain, a British citizen now
corporate strategist and chairwoman of living in London, is co- chairman of the
Bain & Company, holds degrees from The Management Board of Deutsche Bank along
Hebrew University of Jerusalem and with Jürgen Fitschen. Born in Jaipur, India,
Harvard Business School. Through her work he studied economics at Sri Ram College of
and her involvement in an array of inter- Commerce at Delhi University and business
national business organizations, Gadiesh administration at the University of Massa-
has worked with hundreds of CEO s and chusetts Amherst. At the helm of a genuinely
senior executives on strategy development global financial institution, Jain – a fluent
and, in particular, change management English and Hindi speaker, with some
within corporations. She divides her time German knowledge – is always on the move
on client work between North America, and used to operating across cultural and
Europe and Asia. linguistic barriers.

PRUDENTIAL NOKIA /MICROSOFT

Tidjane Thiam, a dual Ivorian and Stephen Elop was born in Canada, and
French citizen and CEO of Prudential plc studied computer engineering and manage-
since 2009, studied in France and has a ment at McMaster University before
background in advanced mathematics and embarking on a management career in IT
physics. He started his professional career and telecommunications. Elop has held
at McKinsey in Paris and New York before senior positions at several companies,
relocating to Côte d’Ivoire to become CEO including Macromedia, Adobe Systems and
and later chairman of the National Bureau Microsoft. He was appointed Nokia’s first
for Technical Studies and Development; non-Finnish CEO in 2010, but moved
as Secretary of Planning and Development, back to Microsoft as Nokia Executive Vice
he was also a cabinet minister. Thiam President of Devices and Services when
held senior positions at McKinsey and the latter acquired Nokia’s Devices and
Aviva before joining Prudential in 2008. Services business in September 2013.
 RENAULT/NISSAN PEPSICO
Carlos Ghosn, French-Lebanese-Brazil- Indra Nooyi, chairwoman and CEO of
ian manager and simultaneously chair- PepsiCo since 2006, is a US citizen, but was
man and CEO of Paris-based Renault and born in Madras (now Chennai), India. Nooyi
Japan-based Nissan, is a global citizen. received a bachelor’s in physics, chemistry
Of Lebanese descent, Ghosn was born in and mathematics from Madras Christian
Brazil but returned to Lebanon with his College in 1974 and a master’s in public and
mother at the age of six. He then moved to private management from Yale School of
Paris to study engineering, graduating Management in 1978. Before joining PepsiCo
from École Polytechnique in 1978. The first in 1994, Nooyi served, inter alia, as Senior
18 years of Ghosn’s career were spent at Vice President of Strategy and Strategic
Michelin (in Brazil and the USA); he has Marketing for Asea Brown Boveri and
been CEO at Nissan and Renault since 2001 Vice President and Director of Corporate
and 2005, respectively. Strategy & Planning at Motorola.

NESTLÉ ABB
Paul Bulcke, CEO of Nestlé S.A. since Ulrich Spiesshofer, who holds a
2008, may have stuck loyally to his employ- master’s in business administration and
er since 1979, but his career has taken him engineering and a PhD in economics from
to all corners of the globe. Born in Belgium, the University of Stuttgart, hails from
Bulcke has worked, or been responsible Germany. He became CEO of the ABB Group –
for markets, in places as diverse as Switzer- a world leader in power and automation
land, Germany, Spain, Peru, Portugal, technologies – in September 2013. Spiess-
the Czech and Slovak Republics, the USA , hofer has worked in multiple jurisdictions,
Canada and the Caribbean. Unsurprisingly, including Germany, Switzerland and
Bulcke is something of a polyglot, speaking Australia, and now runs a company with
French, English, Spanish, Portuguese global revenues of nearly USD 40 billion,
and German in addition to his native Dutch. approximately 145,000 employees
and operations in around 100 countries.

AB INBEV THE COCA-COLA COMPANY

Carlos Brito is CEO of Anheuser-Busch Muhtar Kent, a New York-born Turkish-
InBev, the leading global brewer and one American, has been chairman and CEO
of the world’s top five consumer products of The Coca-Cola Company since 2009,
companies. A Brazilian citizen, Brito having originally joined the firm in Atlanta
earned a degree in mechanical engineering in 1978. In the course of his career, he
from the Universidade Federal do Rio de has held a variety of leadership positions,
Janeiro in Brazil and an MBA from Stanford including General Manager of Coca-Cola
University. He joined Anheuser-Busch Turkey and Central Asia, President of
InBev in 1989 and was appointed CEO the East Central Europe Division and Senior
in December 2005. Prior to joining the Vice President of Coca-Cola International,
company, he held positions at Shell Oil with responsibility for 23 countries. He
and Daimler Benz. sits on numerous high-level international
business committees.
GLOBAL INVESTOR 2.13 —16

“The core role that while doing so, it now also has more nurses per capita in its domes-
tic labor market than comparable countries and even some much

migrants play in
richer ones, including Great Britain. Second, remittances (money sent
home from migrant workers to their families and friends) from abroad

economic development
are integral to many developing economies. Remittance payments lift
people out of poverty. Their impact, if used for entrepreneurship or

is often overwhelmed
investment at home, is often many times the original value. In 2012 ,
officially recorded remittance flows to developing countries reached
an estimated USD 401 billion. For Tajikistan, these flows amount to
by defensive measures almost half of GDP and for Liberia and Lesotho around 30 %. If man-
aged appropriately, with good governance and smart investments, the

to keep migrants out.”
the world economy over 25 years. There are, however, legitimate
concerns about large -scale migration. The possibility of social dislo-
cation is real. Just like globalization – a strong force for good in the
world – the positive aspects are diffuse and often intangible, while
the negative aspects bite hard and tangibly for a small group of peo-
ple. The second myth is that migration destroys developing economies
by siphoning talent away from the places that need it most. There is
some truth to this. For example, 65% of university graduates from
Morocco, 60 % from Gambia, 25% from Iran and 10 % from the Phil-
ippines leave their home country, usually to move to a developed
economy. However, the so-called “brain drain” is mitigated twice over.
First, when these countries become professional training centers,
they can produce far more skilled laborers at home than they did
before the “drain” began. The Philippines, for example, provides one
of the largest sources of migrant nurses to developed economies. But
“brain drain” can become the “brain gain” for developing economies.
Promoting “brain circulation” by which skilled migrants are able to
return to their home countries and bring with them the technologies
and investment opportunities derived from their migrant experiences
can also play an important role in launching domestic growth, as
Taiwan, Israel and Bangalore in India demonstrate.
The bottom line
In the future, it will become even more imperative to ensure a strong
labor supply augmented by foreign workers. Globally, the population
is aging. There were only 14 million people over the age of 80 living
in 1950. There are well over 100 million today, and current projections
indicate nearly 400 million people over 80 by 2050. With fertility col-
lapsing to below replacement levels in all regions except Africa, rap-
idly rising dependency ratios and a decline in the OECD workforce
from around 800 million to close to 600 million by 2050 is projected.
The problem is particularly acute in Europe, North America and Japan.
But the developing world will feel the pinch too; by 2050, some 20 %
of India’s population and a total of 31% of China’s are projected to
be aged 65 or older.

Migrants: a key component of the workforce in major developed markets

Migrants are a vital part of the total population in a number of countries in the
developed world. The large pies show what percentage of the entire populace are migrants.
The smaller colored charts indicate the proportion that migrants make up within
specific age groups. Source: UN DESA

14.3% 12.4%
International migrant
stock as a percentage
of the nation’s overall
population.

USA United Kingdom

Of the nation’s 25–29 age

group, the percentage
who are migrants.

Of the nation’s 30–34 age

group, the percentage
who are migrants.

Of the nation’s 35–39 age

group, the percentage
who are migrants. 18.7% 22.7% 25.4% 22.8% 25% 21.4%
 GLOBAL INVESTOR 2.13 —17

Reasons for migration

The grounds for moving are many. But the main driver is
economic, as high-skill migrants bring specialized
talents, while lesser-skilled laborers fill short-term gaps.
Source: Ian Goldin
Additional
details on our
map MODERN
MIGRATION
on page 8 Conflict migration 2 million

Despite the fact that migration is a vital element in global development, Social migration 2 million
there is no global organization up to the monumental task of assisting
the flow of people across borders. International migration is the orphan
among the alphabet soup of global governance organizations. The
International Organization for Migration is not part of the United
Nations and could be transformed to play a more active, treaty-based Economic migration 5 million
global role. A first task is to establish an agreed definition of migration
and develop a global database, as there is no common statistical
basis for analysis and to inform shared policies. The second objective
is to develop rules that can assist migrants, not least with respect to
pension portability, temporary work permits and basic rights. Migration
has always been the key driver of human progress and dynamism. In Student migration 3.5 million
the age of globalization, the rising barriers being erected to migrants
pose a threat to economic growth and the sustainability of our econ-
omies and societies. Free migration, like totally free trade, remains a
utopian prospect, even though within regions such as Europe this has
proved workable. Greater attention needs to be given to the manage-
ment of migration. As John Stuart Mill argued, we need to ensure
Other reasons 2.5 million
that the real local and short-term social costs of migration do not
FGVTCEVHTQOVJGKTTQNGpCUQPGQHVJGRTKOCT[UQWTEGUQHRTQITGUUq Ɓ

28.9% 11.9%

Switzerland Germany

35.2% 42.9% 43.9% 17.1% 20.3% 22.4%

 Chapter II
TECHNOLOGY
ENABLERS
Mobile technology has radically changed the world over
the past decade, with mobile penetration soaring, impacting
banking, travel and many other key industries.

Keeping cities moving

page 20
So far, yet so near CANADA
page 24
Innovation welcome
in a USD 40-billion
business
page 26

North America
USA 3,502,000
Mobile payment
users by region

THE INCREDIBLE RISE

OF MOBILE BANKING
MEXICO

23.4
The total number of users of mobile payments rose
by 55% between 2009 and 2010, to 109 million.
The greatest number of mobile payment users is found
in Asia Pacific, far ahead of any other region.

Source: KPMG

MOBILE PENETRATION ACROSS THE GLOBE

The number of mobile subscriptions per 100 people

increased by more than 60 between 2007 and
2012 in countries such as the Russian Federation,
Brazil, Saudi Arabia, Egypt, and Indonesia.
Latin America
8,010,000
Change in mobile subscriptions per 100 people
in 2012 compared to 2007

> 60 40 – 60 20 – 40 < 20

Source: UN, World Bank

 GLOBAL CROWDFUNDING 10 MOST CONGESTED CITIES
VOLUME IN 2012
Three Belgian cities rank among the
ten most congested European and 0.5
The total volume of funds raised 1
through crowdfunding grew by North American cities – a quite
unenviable track record. In the USA, 5
81% to reach USD 2.7 billion in 2012.
the two worst-affected cities are 10
Los Angeles and San Francisco. Only Bilateral remittances estimates
for 2011 using migrant stocks,
In million USD commute trips made during peak
host country incomes
hours, during the week, were used to 20 and origin country incomes
North America Europe
1,606 945 compile this data. in billion USD

Asia
33
FLOWS OF INTERNATIONAL
*QWTUYCUVGFKPVTCHƟELCOUover REMITTANCES
the last 12 months
Oceania
76 Nearly a quarter of the total interna-
BRUSSELS Belgium 85.4
tional remittances sent stem from
LONDON United Kingdom 81.7 the USA, while India and China are by
South America Africa
ANTWERP Belgium 76.7 far the largest remittance-receiving
0.8 0.1 ROTTERDAM Netherlands 65.1 countries.
LOS ANGELES USA 62.8
Source: Statista/massolution PARIS France 60.0
Source: WorldBank
STUTTGART Germany 59.9
COLOGNE Germany 56.8
GHENT Belgium 54.8
SAN FRANCISCO USA 53.5

Source: Inrix

Western Europe
7,127,000

UNITED
KINGDOM

GERMANY

FRANCE
ITALY

SPAIN

CHINA JAPAN

UAE
HONG KONG
SAUDI
ARABIA INDIA
#UKC2CEKƟE
62,828,000
PHILIPPINES

NIGERIA
Total 46.4
To

.9
alt

18
42
.5
13
.9

AUSTRALIA

Europe,
Middle East and Africa
27,091,000
GLOBAL INVESTOR 2.13 —20

MASS TRANSIT

Keeping
cities
moving More and more of the world’s people are living in (sub-)urban settings.
This is stretching many mass transport systems to the breaking point.
Sustainable transport expert Dario Hidalgo says governments need to rethink
public transport, focusing on quality, safety and integration.
INTERVIEW by Richard Hall
 GLOBAL INVESTOR 2.13 —21

Guangzhou Specially
marked BRT (bus rapid transit)
lanes connect the city’s mass
rapid transit stations, ensur-
ing that there are practically
no delays in getting riders
to their destinations on time.
GLOBAL INVESTOR 2.13 —22
Dario Hidalgo has spent the last 24 years helping local
and national governments in Latin America, Asia and Africa
plan sustainable public transport systems. He publishes
regularly in academic journals and holds training courses
worldwide. Dr. Hidalgo is based at NGO EMBARQ’sQHƟEG
in Bogotá, Colombia.
Richard Hall: How did you get into
mass rapid transit ( MRT ) and bus rapid
transit ( BRT )?
Dario Hidalgo: After completing a PhD in
urban transport planning in 1997, I joined
Mayor Enrique Peñalosa’s team and worked
on planning the TransMilenio bus system
in Bogotá. The government had initially want-
ed a metro, but it became clear that a BRT
network could be built more quickly and at
lower cost. It was part of a large -scale ur-
ban transformation in my home city and was
an instant success. I have since been in-
volved in more than 20 projects worldwide –
including in cities in Mexico and others as
diverse as Lima, Accra, Istanbul and Indore.
The TransMilenio BRT project in Bogotá
has become quite famous. Why ?
Dario Hidalgo: TransMilenio is a low-
cost, high-impact system. The first phase
(40 km) was completed in just three years
(1998 – 2000). It captured international at-
tention due to its high capacity – more than
40,000 passengers per hour, per direction –
and an innovative public-private partnership
model. The city builds the infrastructure, and
local entrepreneurs (currently seven groups
with nearly 2,000 buses) own and operate
VJGƠGGVsRTQƟVCDN[CPFYKVJQWVUWDUKFKGU
Today the BRT is 106 km long and carries
more than two million passengers a day.
Its success helped mainstream the concept
worldwide. Our database www.brtdata.org
indicates that 150 cities have BRT and bus
corridors; 115 of these have been created
since 2000.
Can you describe some of the typical pitfalls
you face when building a BRT network ?
Dario Hidalgo: Experience around the
globe shows the great potential of BRT, but
planning, financing and organizational diffi-
culties should not be papered over. The im-
portant thing is not to rush into implementa-
tion until all the planning has been thought
through. Also, every city is unique, so copy/
paste doesn’t work. Most of the obstacles
are institutional rather than technical. Such
projects are inherently complex as they
involve aligning a baffling array of interests.
Strong political leadership and well-crafted
communications are essential. One of the
big advantages of BRT systems is that they
can frequently be realized within an elected
leader’s term of office.
A new report written by the Institute for
Transportation and Development Policy and
EMBARQ is titled “The Life and Death of
Urban Highways.” Your thoughts?
Dario Hidalgo: Traditionally, urban trans-
port planning has been all about moving
cars, not necessarily people. As a result,
most cities in the world have focused on
expanding road networks. The result has
“Urban transport planning
has been all about moving cars,
not necessarily people.”
been appalling. Clearly, creating more roads
does not solve congestion; it brings more
cars to the streets. It’s like trying to fight
obesity by expanding the size of our pants!
Several cities – Seoul, San Francisco,
Toronto, Vancouver – have actually begun
removing urban highways and replacing
them with public-transport infrastructure.
We urgently need to reallocate funding from
urban parking and highways to sustainable
transport.
Where are you currently involved in BRT
projects? How important is it to be on site?
Dario Hidalgo: We support sustainable
mobility and urban development initiatives
in Mexico, Brazil, Peru, Turkey, India and
China. We also work with researchers from
Chile, USA , Portugal and Australia via the
ALC - BRT Centre of Excellence (www.brt.cl),
and support 30 Latin American transit
agencies in their quest for quality and
integration (www.sibrtonline.org). On-site
meetings are particularly important when
it comes to convincing decision makers.
Where are the biggest BRT projects today ?
Dario Hidalgo: The construction of a
150 km BRT network in Rio de Janeiro in
preparation for the FIFA World Cup and
2016 Summer Olympics, and the expansion
of Metrobús in Mexico City from 95 to 200 km
are two notable examples. The introduction
of BRT in Mumbai and Bangalore may be
among the most challenging, and capacity
enhancements in the saturated corridors of
Bogotá and Istanbul will certainly be major
undertakings. We expect around 30 cities
to introduce BRTKPVJGPGZVƟXG[GCTU
primarily in Asia – but also, in the near
future, Africa.
How is MRT/ BRT changing mobility
patterns in both the
developed and developing world ?
Dario Hidalgo: We have observed a
cultural shift in Europe and, increasingly,
the USA . People used to aspire to live in a
house in the suburbs and commute. Today,
more and more people want to live in the
city itself – in denser, mixed-use areas.
We don’t know how this trend will evolve in

1 Bogotá A combination of pedestrian cros-
sings, footbridges, cycle paths, roads and bus
lanes ensures that commuters and other
travelers can reach their destinations safely and
efficiently, regardless of the mode they opt for.
2 Guangzhou China’s bike-sharing
programs are the biggest in the world.
As in Hangzhou, there will also be well over
100,000 bicycles provided for public
sharing programs in Guangzhou by 2020.
the developing world, but mass transit plan-
ning provides an excellent opportunity to
influence the future shape of cities. Places
such as Copenhagen, Curitiba and Singa-
pore show how successful strategies that
dovetail land use and transport planning
can be. We must adapt these models to fit
the needs of rapidly emerging economies.
This needs to happen fast before car-cen-
tric urban sprawl takes root. Interestingly,
the Chinese cities of Wuhan and Hangzhou
have set up the two largest bike -sharing
programs in the world ( 90, 000 and 60, 000
bicycles, respectively). Hangzhou plans to
expand to 175, 000 bikes by 2020. It’s a
revolution on two wheels! China now also
leads the world in metro systems, with
Beijing and Shanghai already surpassing
Photo: Institute for Transportation & Development Policy
London as the longest networks.
Public transport usage is very high in
Latin America. In US cities, it accounts for
just 3 %– 4% of urban trips. How do
you see this evolving?
Dario Hidalgo: Transit ridership is grow-
ing rapidly in the USA . More people are
choosing urban lifestyles. In the major ur-
ban centers a culture of membership rather
than ownership is emerging thanks to
social networks and car-sharing programs.
In Latin America, on the other hand, we see
the opposite trend: a growing middle class
is now able to own more cars and motorcy-
cles, and public transport usage is declining
in most cities. The key in Latin America is
to improve service and safety, which may
require subsidies, and to introduce conges-
tion charging and parking management
schemes.
How do you see the future of MRT/ BRT as
cities expand and technology develops?
Dario Hidalgo: Some of the key innova-
tions are in vehicle technology. Trains are
DGEQOKPINKIJVGTCPFOQTGGHƟEKGPVDWUGU
are catching up with cleaner propulsion
technologies such as natural gas and hybrid
electric. The overarching goal must be to
create multimodal, integrated public-trans-
port networks with “last mile” connectivity
to onward transit services as well as car and
bike sharing. Mobile user interfaces, which
are improving all the time as smartphone
penetration rises, play an increasingly
important role here. Smart ticketing systems,
including electronic purses, are likewise
GLOBAL INVESTOR 2.13 —23
becoming available on mobile devices. I see
these technologies being further integrated
CPFTGƟPGFTCVJGTVJCPUQOGICOGEJCPI-
ing innovation turning everything on its head.
Can you describe your most unusual
MRT/ BRT journeys?
Dario Hidalgo: Crossing the Bosporus
Strait and jumping on and off the fast and
frequent Istanbul Metrobüs; gliding through
The Strip in Las Vegas on a shiny golden
bus-cum-tram; and rattling through hectic
and historic Mexico City in a hybrid bus.
My most surreal experience was sharing
a train carriage with 700 -plus people in
Mumbai, which has the world’s highest
VJTQWIJRWVUWDWTDCPTCKNU[UVGO Ɓ
GLOBAL INVESTOR 2.13 —24

MOBILE CONNECTIONS

So far,
yet so near
As mobile technologies increasingly facilitate Internet access from anywhere
and at any time, a new economy is arising. It is not only reshaping the
way people interact, work and learn, but also increasing productivity – bringing
people, processes, data and things closer to build a smarter world.
TEXT Uwe Neumann, Senior Equity Analyst, Credit Suisse

In the 1990 s, the PC was the “go-to” device to access the
Internet. Not anymore. The rising penetration of mobile
phones has placed the Internet in our pockets (mobile Inter-
net). According to Ericsson’s mobility report, total global
smartphone subscriptions hit the one -trillion mark in 2012 ,
and will reach 4.5 trillion by the end of 2018 , covering more
than 60 % of the world’s population. Making use of this im-
mense potential means exploring new ways of communicat-
ing – possibly redefining the concept of mobility altogether.
The next step is connecting people, processes, data and
things. Cisco calls this the “Internet of Everything” and pre-
dicts that things connected to the Internet will surge from
10 trillion to 50 trillion by 2020, essentially creating many
new networks. This will likely reshape the way people work,
interact and learn. It can, in turn, be capitalized on by com-
panies globally through improving productivity, accessibility
and visibility. Imagine that a medical procedure is not con-
ducted in a doctor’s office anymore, but that a patient wait-
ing for a check-up receives a scanner in the form of a pill
delivered to the home. The pill is then swallowed and the
information is automatically transferred to the treating doctor
over the Internet. Here, for the patient, mobility means not
having to travel while still receiving a service. According to
Cisco, USD 2.5 trillion of value over the next ten years will
likely be generated globally through higher labor efficiencies
and improving collaboration. Technology trends, such as cloud
and mobile computing, virtualization, Big Data and increased
processing power, are driving this “Internet of Everything”
economy. Given the huge opportunities of the market envi-
ronment, CIOs worldwide have become more attuned to the
mobile -first technologies, and are increasingly noting the
critical importance of a mobility strategy to remain com-
petitive in future.
A mobility strategy ticks several boxes. One major box is
enabling employees to better collaborate and use the expo-
nential power of networks. Metcalfe’s Law – named after the
founder of network equipment company 3 Com, Robert Met-
calfe – states that the value of a network increases propor-
tionately to the square of the number of users. This means
that people not only simply use the network, e.g. a virtual
Internet meeting, to gain information about a company’s ini-
tiatives, but that a “network effect ” can also be achieved,
allowing people to quickly find the person best suited to
provide advice/services for customers or process develop-
ment. Other examples are virtual research and development
teams, which increase the mobility of knowledge. Mobile
virtual collaboration teams are enhancing and managing cre-
ativity, increasing knowledge -sharing, adding cultural as-
pects and improving organizational performance. However,
this is not limited to large firms or the office workspace in
general. Smaller companies ( SME s) can now gain access to
information, education and advice from experts in highly
specialized fields transcending geographic boundaries. Vir-
tual platforms enable finding specialized employees easily
and even find temps for one -off tasks, without having to
provide a workspace. Some SME s can even take shape in a
virtual mobile Internet world, where like -minded people work
together on a project without ever meeting in person. On a
private basis, shared painting applications offer an opportu-
nity to participate in a painting project where various painters
 GLOBAL INVESTOR 2.13 —25

from around the world work on a single picture. While this

does not (yet) replace meeting in person, it enables people
to acquaint themselves with their counterparts and to lay the
foundation for relationships.
Another box that a successful firm’s mobility strategy
needs to tick is the ability to share large digital files and
provide intelligent digital work platforms to bridge the phys-
ical gap and share both work and ideas immediately on a
global basis. Tele - and video-conferencing solutions should
be accessible from a variety of mobile devices. According to
IT research firm IDC, one interesting trend is the use of more Uwe Neumann, CEFA , joined Credit Suisse Private
Banking in 2000 as an equity analyst responsible
web-based software solutions, such as Microsoft Lync, over for the telecom and technology sector. He has
traditional ones that require special hardware in cases such 28 years of experience in the securities and banking
business, including 18 years in research. He holds
as video-conferencing. In this context, two IT infrastructure a Master in Economics from the University of
trends support the increasing use of software -defined mobil- Constance, Germany.
ity solutions. First there is the already well-known Bring Your
Own Device ( BYOD) trend. It enables an employee to stay
connected with family and friends, while also with the com-
pany’s network by using their own mobile devices. Second
is the Bring Your Own Application ( BYOA ) trend whereby
employees can use cloud-based applications from external
providers and the corporate network at the same time on
their own devices. For example, a single department of a
firm could decide to use a meeting application, such as much more efficient compared to the company’s own col-
CloudOn, GoToMeeting or Asana, downloaded from an ex- laboration tools, which may not be specialized enough for
ternal provider to arrange or attend meetings virtually, share the department’s own purposes. In addition, employees can
files or collaborate on projects. This could turn out to be even create their own applications, which they can use or
share with others over the companies’ communication net-
works. However, these initiatives on the part of companies
Collaboration, video, mobility drive value in the IoE economy
to encourage employees to take advantage of a highly con-
In the Internet of Everything (IoE), there continues to be exponential nected virtual world require investments in IT infrastructure.
increase in the connectivity between people, processes, data and things. By
Companies are thus setting up cloud-based and virtualized
2020, the number of such connections is predicted to grow from 10 trillion
to 50 trillion. Cisco foresees that an incredible USD 14.4 trillion will be at IT infrastructures that make their operating systems inde-
stake in the new IoE economy, as the ever-changing capabilities of collabora- pendent of the hardware.
tion, video and mobility will facilitate the sharing of insights and data
while cutting costs, accelerating innovation and reducing time to market. But there is also a flip side. The BYOD and BYOA
Source: Cisco business practices also leave companies vulnerable to
cybercrime. With the proliferation of data communication in
the virtual world, the number of cyberattacks is increasing
exponentially. According to a United Nations report, more
than USD 1 trillion was lost in cyberspace in 2008 due to
M2P online fraud, identity theft and loss of intellectual property
USD 3.5 tn
globally. In addition, demand for privacy is rising, as not
only can people’s online activities be tracked and moni-
M2M
USD 6.4 tn tored, but also their offline ones as a result of location
signals from mobile devices.
Swifter data processing, greater efficiency, indepen-
P2P dency of location, instant information retrieval and cost re-
USD 4.5 tn
ductions are all benefits waiting to be reaped and are likely
to outweigh the risks and disadvantages. The new opportu-
nities allow us to become smarter in everything that we are
doing together – from receiving medical care to developing
ideas and realizing their benefits – be it in a virtual space or
People-to-people
Machine-to-machine
face -to-face in the real world when we move beyond the
Machine-to-people TGCNOQHCTVKHKEKCNEQPUVTWEVU Ɓ
GLOBAL INVESTOR 2.13 —26

Where brick-and-mortar retail banking

doesn’t exist, smartphone technology
and other modern systems are enabling
those in emerging economies to access
mobile financial services.

Photo: BFG Images

 GLOBAL INVESTOR 2.13 —27

MOBILE MONEY

Innovation welcome
in a USD 40-billion
business
Countless millions in poorer regions of the world depend on the cash transfers that
migrant family members remit from abroad. But accessing those payments and obtaining
other vital financial services have not always been easy. The situation is beginning
to change, as banks and telecom operators are now establishing partnerships.
TEXT Christine Schmid, Head of Global Financials Research, and Javier Lodeiro, Equity Research Analyst, Credit Suisse

Migrants transferring remittances to their home countries have an
important economic impact on many developing economies. As large
sums are transferred through informal channels, the exact figure is
FKHƟEWNVVQECNEWNCVGDWVVJG9QTNF$CPMGUVKOCVGUVJCVUSD 406 billion
was sent home by migrants to developing countries in 2012 , repre-
senting roughly the combined 2012 gross domestic product (GDP)
QH0KIGTKCCPF8KGVPCO6JG9QTNF$CPMGUVKOCVGUVJCVTGOKVVCPEGU
to developing countries will grow to USD 534 billion by 2015 . On
average, each of the 231 million migrants sends USD 1,800 to her or
his family per year. This cash flow is critical as many of these pay-
ments are made to poorer parts of the world population that struggle
to make up for money shortfalls, especially in times of economic
turbulence. As such, remittances exhibit a countercyclical behavior
and contribute to reducing poverty. Often excluded from traditional
forms of banking, the beneficiaries rely on such payments for their
consumption of daily goods or financing projects. These days, classic
remittances are supported by new service models and technological
development, which thus helps to support economic growth.
Owing to the increasing adoption of smartphones worldwide, and
with Internet data traffic growing at high double -digit rates, tradi-
tional forms of banking such as branching and ATM s (automated
teller machines) are no longer sufficient. As a result of modern tech-
nology, new companies are entering this line of services with an in-
creasingly bright future. Modern forms of banking can supplement
remittances and diversify a country’s financing needs.
Over the last 15 years, growth in remittances has been fastest in
Asia and the Pacific, followed by Africa, while the slowest growth has
occurred in the Middle East. The graph on page 28 shows remittance
growth in selected countries, highlighting a stable growth pattern. In
total, the 2008 financial crisis had no significant impact on remit-
VCPEGU4GOKVVCPEGKPƠQYUTGRTGUGPVOQTGVJCP10 % of GDP in many
countries, such as the Philippines, Bangladesh and Haiti.
Today’s remittance service providers at risk
Given the dependence on remittances in some countries, public aware-
ness is focusing on the transaction costs of remittances. Accord-
KPI VQ VJG 9QTNF $CPM TGOKVVCPEG HGGU TGRTGUGPV TQWIJN[10 % or
USD 40 billion of funds remitted annually. In some countries, remittance
fees can exceed 15% (e.g. in Japan it is 18 %). The estimated an-
nual remittance fees of USD 40 billion are a sizeable amount consid-
ering that in particular it is migrant families with modest backgrounds
who rely on them. To maximize the impact of remittances on local
economies, the G8 embarked on the “ 5x5” objective in 2009, aimed
at reducing the cost of remittances by 5% p.a. within five years. >
GLOBAL INVESTOR 2.13 —28

TWO SUCCESSFUL FINANCIAL SERVICES MODELS

DEVELOPED WORLD EMERGING WORLD

LENDING CLUB M-PESA

This company is active in offering a peer-to-peer social
network in the USA that brings borrowers and investors
together online and leaves the banks out of the picture.
Lending Club checks the borrower’s request for a loan,
based on the information submitted, and assigns the loan
with respective interest payments if approved. The inves-
tors buy “Notes” which represent a portion of a loan.
The company earns money by collecting small fees from
both the borrower (one-time processing fee) and investors
(service fee). For the low 10% of applications that are
successfully granted a loan (thus implying a focus
on creditworthy borrowers), the result is lower rates
and quicker processing, while lenders obtain higher
rates. As such, investors have earned an average net
annualized return of over 9.5% since 2007.
A highly successful example of how to succeed in a devel-
oping country with mobile money technology is Kenya’s
M-PESA, which is used by 40% of the country’s adult pop-
ulation. The number of domestic transactions now exceeds
Western Union’s transactions worldwide, making up 17%
of Kenya’s GDP in 2011. The system is based on an idea
from Vodafone whose affiliate Safaricom cooperated with
the Central Bank of Kenya and successfully recognized the
ability of mobile phones to lower the costs of transactions
for poor people. Without even visiting a bank, customers
are able to deposit cash, exchange it for electronic value
at retail outlets such as gas stations, and withdraw or use
it for payments if desired. The company has capitalized
on strong latent demand for domestic remittances, a lack
of different systems and competition, transparent pricing,
a supportive banking regulator and its presence in rural
areas, thereby quickly establishing a critical mass of
customers. Crucially, these customers gained trust in the
system very quickly due to the advanced technology of
the company Rackspace, which used a satellite streaming
strategy and experienced professionals to enable security,
constant real-time transaction data and 24-hour custom-
er support. M-PESA’s ability to make every transaction
profitable distinguishes it from banks that often struggle
to make money from small-value customers, without
engaging in business relationships with them.

Growth of remittances in selected countries Remittances from migrant family members abroad to those living in emerging countries have seen a steady increase
over the last two decades. This rate accelerated, in some cases significantly, as we entered the new millennium. Remittances to Nigeria increased ninefold between 2004 and 2009,
surpassing the amounts sent home to those in Pakistan, Bangladesh and, briefly, the Philippines. Source: World Bank

Remittances of selected countries (USD bn) Bangladesh Nigeria Pakistan Philippines

25

20

15

10

0
1990

1991

1992

1993

1994

1995

2008

2009

2010

2011

2012
1996

1997

2007
1998

1999

2000

2001

2002

2003

2004

2005

2006
 GLOBAL INVESTOR 2.13 —29

Thus, the final savings in remittance fees over the five -year period
would exceed USD 9 billion by 2014 .
#TGEGPVUVWF[D[VJG9QTNF$CPMGUVKOCVGUVJCVINQDCNTGOKVVCPEG
costs have contracted by 9.8 % since 2008 (and by 15.9 % if special-
K\GFOQPG[VTCPUHGTQRGTCVQTUCTGVCMGPKPVQCEEQWPV9JKNGVJGEQUV
savings achieved are definitely positive for the receivers, the targets
have been missed so far, and more has to be done. As usual, com-
petition is a key driver for lowering transaction fees. Mobile banking
Christine Schmid CFA , is Head of Global Financials
or modern banking models in general could reduce the transaction 4GUGCTEJYKVJKPVJGUKPINGUGEWTKV[TGUGCTEJWPKV5JG
costs of remittances. New models could also be used to underwrite has covered Financials for 14 years and coordinates the
INQDCNƟPCPEKCNXKGY5JGLQKPGF%TGFKV5WKUUGKP
loans for projects and ultimately fund the economy using new technol-
KPCEEQWPVKPICPFNCVGTRQTVHQNKQOCPCIGOGPV5JGJQNFU
ogy to circumvent the lack of traditional banks. C/CUVGTKP'EQPQOKEUHTQOVJG7PKXGTUKV[QH<WTKEJ
Javier Lodeiro CFA , FRM LQKPGF%TGFKV5WKUUGKP
9JCVPGGFUVQDGFQPGVQHQUVGTCFFKVKQPCNƟPCPEKPI! CUCPGSWKV[TGUGCTEJCPCN[UVTGURQPUKDNGHQTVJGINQDCN
insurance sector and USDCPMU,CXKGTJCU[GCTU
9JKNGVGEJPQNQI[KUWPKXGTUCNN[UGGPCUCYC[QHWPNQEMKPIVJGRQVGP- QHGZRGTKGPEGCUCDW[CPFUGNNUKFGCPCN[UV*GJQNFU
C/CUVGTKP'EQPQOKEUHTQOVJG7PKXGTUKV[QH$GTP
tial of mobile phones to capitalize on the “unbanked” population, reduce
costs and facilitate remittance payments, there are a few pitfalls that
need to be avoided. After all, mobile financial services do not have a
high penetration in all growth markets yet. In many emerging econo-
mies such as Tanzania, Ghana and Kenya (see the box on M-PESA )
people have never done business with a bank, but are using mobile
financial services regularly. In countries such as Pakistan, Nigeria,
Argentina and India there is still considerable potential to improve the
use of mobile financial services. One difficulty lies in the fragmented
structure and lack of convergence in the mobile technology systems.
Other problems include the reluctance of banks to engage in partner-
ships with telecom operators, the unregulated nature of the business,
network security, customer privacy, liability, fraud prevention and
standardization. Hence, governments need to assist by creating a
regulatory framework, and companies need to adapt their business
models to their customers.
Under these circumstances, it follows that traditional companies
offering financial services such as banks are only partially key to ac-
EGNGTCVKPIOQDKNGDCPMKPI9JKNGVJGVTGPFKPTGOKVVCPEGEQUVUENGCTN[
points in the right direction, a solo attempt by banks will not suffice
to minimize costs. Instead, mobile network operators with the tech-
nological know-how to develop relevant services and systems should
contribute to increasing the use of mobile devices for transacting
remittances, and thus lower costs. Moreover, innovative attempts
by companies to build on their clients’ Internet presence in order to
evaluate their credit ratings help to generate additional sources of
loans in developing countries. This can be especially fruitful where a
large proportion of the population does not have access to banks and
loans, but are avid users of new technologies. Similarly, in the case
of developed markets, companies like Lending Club (see box) also
aim at reducing transaction costs by omitting an intermediary financial
institution. Last but not least, willingness among banks to engage in
partnerships with mobile operators as seen by the Kenyan company Additional
M-PESA (see box) is also critical to ensuring the ongoing success of details on our map
PGYN[KORNGOGPVGFHQTOUQHRC[OGPV Ɓ TECHNOLOGY
ENABLERS
on page 18
 No
Low Middle High information
Inequality of economic
opportunity index

INEQUALITY OF ECONOMIC OPPORTUNITY

Chapter III Countries with low inequality of economic opportunity, such
as Norway, are those that have a higher degree of intergen -

SOCIAL/POLITICAL erational or social mobility. Countries characterized by

greater inequality of economic opportunity, such as Brazil,
have a higher degree of income inequality.

DRIVERS Source: IZA

Countries with low inequality of economic opportunity have

the highest social mobility. A rising number of university
graduates choose to emigrate, among them many scientists.

Moving ahead in Africa

page 32

US
(Un)equal

.7
opportunity

23
A
D
page 36

NA
CA
Managing

.9
46
migration

E
D
AU
K
page 38 U

UK
CA
US

0
CN

5.
SA
U
HOW WELL-EDUCATED ARE YOUR IMMIGRANTS?
.4
CN38

The proportion of recent migrants to OECD countries holding

IN

a university degree rose by 5 percentage points to 31% between

2000 and 2010. Luxembourg, Denmark and the Netherlands
benefited most from this trend. Among the native-born popula-
tion the proportion increased 4 percentage points to 29%.

University graduates as % of total, percentage-point change 2000–2010

Recent immigrants Native born

–10 –5 0 5 10 15 20 25
COLOMBIA

E
D
LUXEMBOURG

CA
US
DENMARK
3
8.
NETHERLANDS
IL
AZ

GERMANY
BR

PERU
1
7.

AUSTRALIA
AR

UNITED KINGDOM
FR
CO

CANADA
PE

HUNGARY
ARGENTINA
AUSTRIA
OECD AVERAGE
USA
28.5
NEW ZEALAND
26.5
FRANCE
NORWAY
SWEDEN
BELGIUM TOP 10% VS. BOTTOM 10%
15.9
ITALY After taxes and transfers, the richest
SPAIN 10% of the population in OECD
countries earned 9.8 times the Multiplier
PORTUGAL 9.8
income of the poorest 10% in 2010, 10.0 8.9
GREECE
OECD AVERAGE

with the largest gaps recorded

IRELAND in Mexico, Chile and the USA, and
the lowest in Denmark, Finland and
COUNTRY

5.0
CANADA

MEXICO

FINLAND Belgium.
CHILE
USA

Sources: Economist/OECD Source: OECD

 Amount of Native scientists
immigrated scientists going abroad

% %
Other Other
origins destinations

BRAIN TRADE

Switzerland has the highest percent-

age of immigrant scientists. More
than half of its researchers are
non-Swiss, a large proportion being
German. On the other hand, a third
of the Swiss scientists emigrate,
with the USA and Germany being their
main destinations. On the other
extreme, Japan was the most insular
country surveyed, exchanging the
least scientific talent with the rest of
the world.

AU
E
Source: IEEE Spectrum
D

CA
K
U
US
.9

US
13

US

E
D
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K
25

K
U

U
EN

K
U
M
ED

.3
O

US

US
13
SW

K
NG

U
KI

.4

CH
FR

RUSSIAN FEDERATION
26
D

E
TE

AR
.6

D
37

NI

.7
S

US
U

EN

21
ND
D
.9

LA
E
D

32

.3
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CA
US
23
RU

TH

K
.8

FR
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E

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21
D

.1
LG

K
US
33

U
BE

Y
IT

AN

E
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18
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US
8.
IT

IT

CE
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23
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AN

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16
FR

FR
.7

N
IT

56

AI
SP
.3
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Y
17
D

AL
IT
IT

3
7.

US
AR

0
3.

1
SOUTH KOREA
FR

3.
FR
IT

N
PA
E

JA
D
ES

0
5.
CHINA

CN
US

KR
.8
39
IA
D
IN

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U
US
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18
A
LI
RA
ST
AU
.5
45
K
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CN

15.1
13.1 13.6

10.8 10.7 10.7

10.0 10.2
9.1 9.3
UNITED KINGDOM

8.9
7.7 8.0
NETHERLANDS

NEW ZEALAND

7.2
SOUTH KOREA

6.9 6.7
6.0 6.1 5.6 6.0
5.3 5.4
AUSTRALIA
PORTUGAL
DENMARK

HUNGARY
GERMANY
BELGIUM
FINLAND
IRELAND

SWEDEN
NORWAY

POLAND

FRANCE

GREECE

TURKEY

ISRAEL

JAPAN
SPAIN

ITALY
GLOBAL INVESTOR 2.13 —32

SOCIAL MOBILITY

Moving
ahead in
Africa
Education is often seen as playing a crucial role in improving social mobility and raising
incomes. However, these remain elusive goals in modern sub-Saharan Africa, which cannot yet
guarantee the supply of talent it needs to industrialize nor fully absorb the talent it produces.
Pedro Conceição reflects on the paradox of mobility and educational attainment in Africa.
TEXT Pedro Conceição, chief economist, regional bureau for Africa, United Nations Development Programme, New York
 GLOBAL INVESTOR 2.13 —33

Malawi Phoya, an author and blogger,

takes a few minutes out to relax in his
office in the center of the city in Blantyre.
GLOBAL INVESTOR 2.13 —34
p+P#HTKECVYQQWVQHƟXGUVWFGPVU
drop out of primary school.”
Giselle Weiss: Broadly speaking, how
would you characterize the educational
landscape across Africa?
Pedro Conceição: First off, it’s very
important to recognize the economic prog-
ress that has been achieved across the
continent since the turn of the millennium.
From the mid-1970 s until around 2000,
economic performance in Africa (and here
I mean sub-Saharan Africa) was terrible.
In fact, for many years, per capita growth
was actually negative. Along with the
resurgence in economic growth since about
2000, the share of people living on less
than a dollar a day has been going down,
quite rapidly. And education, too, has
been improving fast.
How do you measure that ?
Pedro Conceição: Around 1990, which
is the benchmark year for the Millennium
Development Goals ( MDG s – something we
use a lot at the UN to measure progress),
about half of the population of school
age was not enrolled in either primary or
secondary school. The figure for enrollees
is now close to 80 %. The MDG is to get
to 100 % enrollment in primary education
by 2015 . We are unlikely to meet that
target. But you can see that the progress
has been dramatic, especially in the
context of rapid population growth. That
creates huge pressure to increase educa-
tional opportunities.
According to the UNDP ’s Human Devel-
opment Index ( HDI ), sub-Saharan African
countries actually come out on top with
respect to speed (not level) of progress
based on indicators of income, education
and health. But you’ve also said Africa
is the most unequal region in the world.
Pedro Conceição: When we look at the
developmental challenges in Africa, we tend
to focus on extreme poverty. What is less
emphasized is the level of inequality in the
distribution not only of income, but also
education and health. In other words, a very
poor child in Africa is much less likely to
get to a school and to be healthy than a child
from even a middle -income family. That is
true everywhere, obviously, but it’s much
more accentuated in Africa. When we
adjust the HDI (which is just an average)
to account for inequality, Africa takes
the largest hit.
How does that affect social
mobility in everyday life?
Pedro Conceição: About 80 % of the
people who are employed in Africa are
in what is called vulnerable employment.
They are working, but they are working
for their family, for their farm, for their own
consumption – activities that do not nec-
essarily pay a wage. If you break this down
between men and women, you find that
85% of women in Africa work in vulnerable
employment compared to 70 % for men.
Moreover, the literacy rate for women is
about 65% compared to about 75% for men.
This is particularly troublesome because
we know that education of girls and women
is very effective in driving many develop-
mental outcomes.
A companion article to this interview states
that, in the industrialized West, education
is the single most important determinant of
an individual’s earnings prospects. Is that
also true of Africa?
Pedro Conceição: Things are changing a
little bit in parts of the developed world
now as a result of the financial crisis. But in
Pedro Conceição is Chief Economist at the United Nations Development Programme’s
( UNDP ) Regional Bureau for Africa. He previously served as Director of UNDP oU1HƟEGQH
Development Studies. He is a specialist in global public goods and on the economics
of technological innovation and development.
general, in a country like the USA , the
higher the level of education, the higher the
income and level of employment. In Africa
we actually don’t see that everywhere.
What we see in some countries – and here
statistics are very poor, and a challenge –
is that the higher the level of education, the
higher the level of unemployment.
Why ?
Pedro Conceição: The structure of the
economy of those countries is not yet
able to fully absorb highly educated people.
Of course, it varies from place to place.
For example, in cities like Nairobi, where
you have a very sophisticated financial
sector emerging, and companies building
around information and communication
technology ( ICT ), you can indeed absorb
skilled workers. In fact, countries where
opportunities exist in natural gas and oil
have a dearth of the engineers, lawyers,
accountants and financial analysts they will
need to fully exploit these opportunities.
At the same time, two-thirds of the labor
force in Africa still live in rural areas.
Pedro Conceição: Yes, and there the
challenge is very different. Unlike Asia and
Latin America, Africa has not had a green
revolution. Agricultural productivity levels
are still very low.
The American economist Robert Reich
has asked, “If we had a strategy designed
to increase jobs and wages, what would
it look like?” How would you answer that
question for Africa in the context of mobility
and educational attainment ?
Pedro Conceição: I go back to this point
about agricultural productivity because the
 GLOBAL INVESTOR 2.13 —35

Additional
details on our
map SOCIAL
AND POLITICAL
DRIVERS
on page 30

benefits would increase farmers’ income,

reduce prices of food staples, and increase
the purchasing power of people in both
rural and urban areas. This could trigger
demand for nonagricultural activities in
rural areas, which would be a stepping
stone toward industrialization. Africa has
been deindustrializing. So investing in
agricultural productivity is critical, as well
2
as removing barriers to entrepreneurship
and creating new business opportunities.
And making the most of the technological
opportunities that do exist, like ICT.
Among young people who do have
oppor tunities, to what extent have returns
on educational investment in Africa
been affected by brain drain?
Pedro Conceição: It’s a challenge. But
there are now efforts by some countries 1 Sokouraba, Burkina Faso
to draw on the diaspora through remittanc- Open learning: an adult literacy class pays
es and sometimes by endeavoring to close attention to their instructor.

attract professionals in medicine or finance 2 Lilongwe, Malawi A doctor is at work

or law to come home.
What are the opportunities for and barriers
to the mobility of talent, both within
and between African countries, and abroad ?
Pedro Conceição: We are not yet there
at all. In fact, enhancing regional integration
in Africa is a big focus of attention. For
example, intra-African trade is very low –
below 10 %. The figure for the European
Union is much higher – close to 70 %. And
that is just for goods, which are much easi-
er to move than people. I was recently in
Maputo, in Mozambique, which is still one
of the poorest countries in the world, but it
is having a commodity boom in natural gas
Photos: Dawin Meckel, Ostkreuz (2) / Michel Gounot, Godong, Corbis
examining specimens under a microscope in
the parasitology lab at a local hospital.
have to avoid children dropping out of
school. In Africa, two out of five students
drop out of primary school. We also have
to focus on the quality of the education
that is provided, not just in basic skills, but
also in agriculture and new technologies.
Could we come back to this issue
of Africa and industrialization?
Pedro Conceição: Africa is at an ad-
vantage when it comes to industrialization
because salaries are very low. In fact, if
you look at labor costs alone, Africa could
compete with China, Bangladesh, and

and coal. Companies there need people
and skills that are not available. As a result,
workers are coming from outside the
continent, less so from other countries in
Africa. In general, moving around Africa
is difficult everywhere.
What are the challenges to creating
greater mobility through education?
Pedro Conceição: The key challenge is
to ensure that children master basic literacy
and numeracy skills. For this to happen, we
many countries in East and Southeast
Asia. But industrial activities are being
squeezed between nonproductive agricul-
tural expansion and low-value -added
services. Moreover, the problem of indirect
costs – such as good roads and a stable
power supply – makes it very tough
for manufacturing to progress in Africa.
Yet it must progress to create the
high- or even decent-paying jobs that
it needs to move ahead. Ɓ
 The golden rule
Inequality lowers mobility. In "equal" countries like Denmark,
children`s prospects do not depend on their parents` standing.
In contrast, in the United Kingdom, high inequality
shapes opportunity at both ends of the income ladder.
Source: Miles Corak, in The Economics of Inequality, Poverty and Discrimination in the 21st Century (ABC-CLIO, 2013),
and Tom Hertz et al., B. E. Journal of Economic Analysis and Policy, vol. 7, pp. 1–46 (2007).

1
0.5 Association Italy United Kingdom
between parent
USA
and child earnings

France
0.4

Japan
Germany
0.3
New Zealand
Sweden
Canada Australia

0.2
Finland

Norway
Denmark
0.1 2
Association
between parent and
child years of schooling

0.1 0.2 0.3 0.4 0.5 0.6

1_The vertical axis is the strength of the relationship between parent and child earnings: as you move from bottom to top, the lower the degree of
income mobility across the generations. 2_The horizontal axis is the strength of the tie between parent and child years of education (i.e. how much higher
a child’s education is for each extra year of parental education). As you move from left to right there is less education mobility across the generations.
 GLOBAL INVESTOR 2.13 —37

INTERGENERATIONAL MOBILITY

(Un)equal
opportunity
Education is the single most important determinant of an individual’s
earnings prospects, says Miles Corak, especially in this era of
increased globalization and technological change. Income gaps within
countries make a good start in life all the more important.
TEXT Miles Corak, economist, Graduate School of Public and International Affairs, University of Ottawa

In the USA and the United Kingdom, where income inequality was
the greatest among rich countries a generation ago, about 50% of
the earnings advantage of relatively well-to-do parents is passed on
to their children. The advantages of birth, or for that matter the dis-
advantages, are similar in Italy and France, where the level of earnings
inequality is comparable, but much less in Finland, Norway and Den-
mark, where labor market outcomes are not as polarized.
In this relative, intergenerational sense, earnings mobility is some-
thing that citizens of all the rich countries value. It speaks for equal-
ity of opportunity, and the notion that children can grow up to become
all that they can be. Talents and energies, not the happenstance of
birth, ultimately determine life prospects.
Systems play a major role too
between schooling levels across the generations is barely noticeable.
The OECD has gone so far as to state that “the United States is one
of only three OECD countries that on average spend less on students
from disadvantaged backgrounds than on other students.” Education
is the key to one’s earnings prospects. This is all the more true in an
era of increased globalization and technological change. Those with
the right skills have managed to ride this wave of change that has
affected all of the rich countries. As a result, income gaps have grown
within countries, making it all the more important for children to have
a good start in life. The best-educated parents have more resources
and incentives to invest in the future prospects of their children. But
where inequality has grown the most, education mobility is the lowest,
CPFGSWCNKVKGUQHQRRQTVWPKV[CTGCNNVJGOQTGVJTGCVGPGF Ɓ

And while intergenerational earnings mobility is not the result of any

one public policy, cultural value or labor market institution, the nature
and quality of schooling certainly play a central role in offering both
an escalator to the top for those from disadvantaged backgrounds,
and a trampoline that preserves the status of the advantaged.
Affordable, high-quality and accessible schooling from the early
years onward is surely the most significant gateway to higher incomes
for children born to lower-income parents. But, at the same time, an
education system with early tracking, varying quality and selective
access preserves existing socioeconomic inequalities. It is no surprise
that earnings mobility across the generations varies to such a
significant degree across the OECD countries: these countries have
very different education systems that are associated with differences
in education mobility.
In the UK , a child with university-educated parents is virtually as-
Photo: iStockphoto

sured not to be a high school dropout. Every extra year of parental

Miles Corak is a full professor at the University of Ottawa, working on social
schooling is associated on average with six tenths of an extra year mobility, inequality and social policy in the rich countries. You can learn more
for the child. But in Finland, Norway and Denmark, the association about his research at milescorak.com or on Twitter@MilesCorak.
 GLOBAL INVESTOR 2.13
—38

Collingwood Estate, in East London’s Whitechapel

district. It has a distinctly multiGVJPKEƠCXQTCPFKU
home to many new immigrants and asylum seekers.
Photo: Stuart Franklin/Magnum Photos
 GLOBAL INVESTOR 2.13 —39

MOBILITY POLICY

Managing
migration
Around the world, nations are only too aware of the strategic importance of labor
mobility, as well as its benefits and the obstacles to achieving it. Reliance
on migrants, both skilled and unskilled, is a complex proposition in the context of
fragile domestic economies, no matter how sensible it seems. Martina Lubyová
reviews some of the major policy trends in managing migration and their implications.
TEXT Martina Lubyová, director, Institute of Forecasting, Slovak Academy of Sciences, Bratislava

Immigration policies run in cycles. In the 19 th century and early 20 th
century, the USA generally encouraged immigration, not least to
settle the West and to build the railroads, but became more selective
after 1920. Similarly, during the UK’s period of rapid expansion during
the 1950 s and 1960 s, New Commonwealth immigrants from metal
workers to doctors could enter and stay in the country at will until the
Commonwealth Immigrants Act of 1962 ushered in an era of ever
greater restriction. Today, as labor becomes increasingly mobile, most
national immigration policies are geared toward managing migrant
flows with the primary goal of securing economic growth.
The OECD’s International Migration Outlook 2013 observes that,
in recent years, migration policies have tended to follow broader labor
market (and, to a lesser extent, demographic) objectives. Since the
1990 s, policies on both sides of the Atlantic have been tested by
economic booms and busts, new patterns of movement, post- 9/11
concerns about terrorism and recently the Arab Spring. Many countries
are currently in the process of fundamentally revising immigration
legislation in response to these developments.
When a domestic population is aging, declining or inactive – here,
the European Union, the USA and Russia are prominent examples –
bringing in foreign workers provides much-needed hands. Govern-
ments everywhere aspire in particular to attract skilled labor to en-
hance productivity. Two major policies employed by governments to
attract skilled labor are points-based systems and quotas. For ex-
ample, a special skilled-worker visa program created in 1990 called
H-1B is credited with fueling the information technology boom in the
USA . The flip side of government strategizing is the needs and ambi-
tions of individuals. Naturally, mass migration flows are also a per-
petual feature of armed conflicts and humanitarian crises worldwide.
But, according to the UN Population Fund, fueled by globalization,
economic migrants are the world’s fastest-growing group of migrants.
Policies track the labor market
(QTQDXKQWUTGCUQPUEWTTGPVRQNKE[VTGPFUNCTIGN[TGƠGEVVJGGHHGEVU
of the recession, with a tendency toward greater stringency. In Australia,
Canada and the UK , for example, recruitment procedures for skilled
migrants have been made more selective. The UK especially, where
net migration (the difference between immigration and emigration)
peaked in 2010 at 252,000, has increased funds requirements for all
migrants and restricted work placements and permit duration for stu-
dents. In the USA , an effort to overhaul the country’s immigration
rules – including cutting red tape for employers and easing the path
to citizenship for America’s 11 million undocumented immigrants – has,
of this writing, stalled in the House of Representatives.
To address issues related to the EU’s labor shortages and aging
population, in 2009 the European Parliament passed the so-called
Blue Card Directive, which aims to fast-track and harmonize the
procurement of work permits for highly skilled non- EU citizens. Nei-
ther a points-based nor a quota system, Blue Cards are contracts
of limited duration, though they can be extended. Not all EU states
have implemented the Directive, though those that have include Ger-
many, the Slovak Republic and Hungary, which are all moving to >
continued on page 42
GLOBAL INVESTOR 2.13 —40

Home may be where the heart is,

but for one family it’s a long way
from where the work is
GUIZHOU

CHINA
0 KM
1,8 5
SHANGHAI

GUIZHOU
PROVINCE

Photos: Patrick Zachmann/Magnum Photos

 GLOBAL INVESTOR 2.13 —41

SHANGHAI

The divided family Zhu Qi Yong and his wife Wang

Gui Qin are migrant workers living in the poor area of
Pudong in Shanghai – 1,850 kilometers separate them
from their children, who live with their grandparents in
their native village Xin Zhou Zen in Guizhou Province.
To provide for their family, they cook in their tiny
apartment for other migrant workers laboring on big
construction sites. They deliver the meals directly to
the construction site. Their two sons, seven-year-old Zhu
Hai Xing and five-year-old Zhu Hai Nan, see their
parents just once a year when they return home for two
weeks during the Chinese Spring Festival.
GLOBAL INVESTOR 2.13 —42
“Most national
immigration policies
are geared toward
managing migrant
ƠQYUYKVJVJGRTKOCT[
goal of securing
economic growth.”
attract new skilled migrants. Indeed, the German government an-
nounced in July 2013 that it had already issued 8,879 cards.
Not all migration takes place between nations. Especially in large,
emerging market countries where the level of local development
dictates job opportunities and needs, policies reflect the efforts of
governments to direct the flow of labor from region to region. In
China, for example, the “hukou” (household registration) system per-
sists as a means of pumping low-cost rural labor into the country’s
booming urban economies. However, securing the social rights of
migrant workers and their integration remains a challenge. Ongoing
talk of reform has as of yet produced no concrete results. In India,
the Mahatma Gandhi National Rural Employment Guarantee Act,
passed in 2005, is intended in part to stem “distress” migration to
cities by promising 100 days of minimum wage employment to a third
of India’s rural households.
Mitigating social pressures relating to migration
Whatever its impulse or manifestation, labor migration entails benefits
as well as costs for the receiving and sending countries (see the
article by Ian Goldin in this issue). As a result, the national migration
policies of developed countries are often governed by their integration
agendas. Although these agendas differ, the Scandinavian countries
represent one distinct group that generally offers open, publicly sup-
ported and relatively generous schemes aimed at integrating foreign
residents into their societies. The United Kingdom, the Netherlands,
Japan and the USA , in contrast, opt for more restrictive schemes
characterized by limited migrant entitlements and a shift of the costs
and responsibility for integration to migrants themselves.
So, too, does Russia, whose economy depends on migrant work-
ers. Most immigrants come from the former Soviet republics, which
have a visa-free travel regime with the Russian Federation. Yet the
majority of immigrants must have a work permit, for which there is a
quota. Many migrants thus end up in the shadow economy. In 2010
the Russian authorities introduced so-called patents for illegal migrant
workers who work for private households, primarily as gardeners,
drivers, cooks and housemaids. While the purchase of a patent grants
legal residence and working status, it does not provide access to
social benefits or insurance.
Owing to the dire state of their economies, countries such as Spain,
Greece and Portugal have reduced their budgets for measures aimed
at promoting labor market integration of migrants. At the same time,
in 2011 and 2012 , Spain enacted new measures aimed at providing
vocational training to the unemployed who had lost their benefits, not
explicitly for, but including migrants. Greece lowered the number of
proof-of-work days required for permit renewal from 200 to 120 per
year, and extended voting rights to migrants. In the face of a con-
tinuing weak labor market, Portugal’s new National Integration Plan
promotes rights and training for immigrants.
In 2011, Denmark reversed its decade -long trend toward stricter
immigration laws. Among other things, the government eased family
reunification rules. Moreover, changes to the Immigration Act of 1999
now entitle immigrants to social assistance from the moment they
arrive in Denmark, and discourage residential segregation. An initia-
tive titled “We Need Everyone,” rolled out in 2012 , targets immigrants
struggling to find a job due to personal or social problems.
Today, migration policies are a tool for addressing the economic
and social challenges of the globalizing world. Developed countries
attract migrants to boost economic growth or to mitigate the con-
sequences of population aging and decline. Developing countries
that cannot generate sufficient job opportunities use emigration as
a valve for excess labor or as a source of remittances. While today
migration policies are primarily governed by immediate economic
concerns, their long-term consequences will mainly concern the
social sphere. Successful integration of foreign populations and
building inclusive multicultural societies should thus be a priority of
VJGINQDCNOKITCVKQPCIGPFC Ɓ
/CTVKPC.WD[QX½ is Director of the Institute of Forecast-
KPICVVJG5NQXCM#ECFGO[QH5EKGPEGUKP$TCVKUNCXC
and Associated Fellow at CERGE- EI in Prague. She
completed her PhD at CERGE- EI in 2002 and worked at
the International Labor Organization’s Sub-regional
1HƟEGUHQT5QWVJ#UKCCPFNCVGT'CUVGTP'WTQRG
and Central Asia. She is a co-author of the OECD’s
International Migration Outlook 2013.
—43
GLOBAL INVESTOR 2.13

$GTNKn-Friedrichshain, the new S-$CJn-Ostkreuz

concourse. To cater for the growing number of
EQOOWVGTUCPFVTCXGNGTUVJGUVCVGPGGFUVQMGGR
upgrading its current infrastructure. Photo: Caro/Muhs/Keystone
 > 75% 50 –75% 0 –50%

Percentage of population living in urban

areas exceeding 100,000 people

2030 — AN URBAN WORLD?

Chapter IV By 2030, 92% of French, 91% of Brazilians

and 87% of Americans will live in urban
areas. The corresponding figures in China

THE FUTURE and India will only reach 62% and 40%
respectively.

OF MOBILITY Source: UNICEF

Global mobility will continue to rise in the coming decades,

creating millions of jobs and generating more air passenger
traffic. More people will also move to urban areas.

New mobility models needed

page 46
How ideas spread
page 50
The China
travel surge
page 52
USA = 1,139 KM
USA
332M URBAN POPULATION
87% URBAN

EMPLOYMENT GROWTH IN THE T&T SECTOR

The global travel and tourism (T&T) sector today employs nearly MEXICO
105M URBAN
100 million people, representing 3% of all employment. When POPULATION
indirect jobs are taken into account, the industry contributes to 83% URBAN
around 1 in 11 jobs. These figures are likely to rise further, with
approximately 66 million direct jobs set to be created worldwide
by 2022, with Asia benefiting most.

Regional contribution of the global travel and tourism sector’s total

employment growth between 2012 and 2022 , in thousands of jobs
RO PE
OT H

BRAZIL
ICA
AM RTH
2,437 EU
ER

198M URBAN
OC

ER
NO

POPULATION
EA

6, 5 8

91% URBAN
NI

09
A

N A
SO TI IC
4,7
0

UT L A ER
28

HE
AS 13 AM AN
9

AS T 7 5 BE
4, RIB
IA ,34 CA AST
8 5 LE E
4 6 3 M ID D
1 A
1, 4 A F R IC Countries forecast to have
NORTH
1 ,6 8 9 the most developed high-speed
train lines in 2025
4,513 SUB-SAHARAN
0 AFRICA HIGH-SPEED TRAIN LINES
9,8 2
A SIA
SO UTH China, Japan and Spain have the
densest high-speed rail networks in use
today – lines where trains can travel
23

at more than 250 kilometers per hour.

,9
47

In 2025, the number of high-speed lines

NO IA

is forecast to have more than doubled

AS
RT

worldwide to 51,677 kilometers.

HE
AS
T

Worldwide high-speed train lines in 2013,

Source: Oxford Economics in kilometers

IN OPERATION = 21,365 km
UNDER CONSTRUCTION = 13,964 km
PLANNED = 16,347 km
FORECAST TO BE OPERATIONAL IN
2025 = 51,677 km
Source: UIC
 EVOLUTION OF AIR PASSENGER TRAFFIC FLOWS BETWEEN MAJOR DESTINATIONS

World air passenger traffic is forecast to annually grow by 5% between 2011 and 2031, with the greatest
increase in air passenger flows to take place within South Asia, as well as between South Asia and Southeast
Asia during these two decades.
Source: ICAST, India

PORTUGAL = 1,006 KM SOUTH ASIAN FLOW SOUTHEAST ASIAN FLOW MIDDLE EAST FLOW
SPAIN = 5,525 KM in South Asia 524% in Southeast Asia 334% from Africa 285%
FRANCE = 5,200 KM from Southeast Asia 417% from China 281%
GERMANY = 2,257 KM
from Europe 320% from Africa 285% SOUTH AMERICAN FLOW
from Middle East 306% in South America 280%
ITALY = 1,318 KM

SWEDEN = 750 KM
TURKEY = 2,805 KM
CHINESE FLOW
in China 281%

RUSSIA
99M URBAN
POPULATION
77% URBAN

FRANCE
61M URBAN
POPULATION
92% URBAN TURKEY
70M URBAN JAPAN
POPULATION CHINA 86M URBAN
78% URBAN 905M URBAN POPULATION POPULATION
62% URBAN 73% URBAN JAPAN = 3,622 KM
IRAN
72M URBAN
POPULATION
PAKISTAN
121M URBAN
80% URBAN
POPULATION
46% URBAN
CHINA = 22,619 KM

INDIA
NIGERIA 590M URBAN POPULATION
PHILIPPINES
144M URBAN 40% URBAN
73M URBAN
POPULATION POPULATION
64% URBAN 58% URBAN

INDONESIA
146M URBAN
POPULATION
54% URBAN

INTERNATIONAL TOURISM BY REGION OF DESTINATION

In 2012, international tourist arrivals exceeded the 1-billion mark globally

for the first time ever, up from 940 million in 2010. Europe will remain the most
visited region over the next decades, though Asia Pacific will be catching up.

International tourist arrivals received (in million)

2010 2030

AFRICA 50.3 134 7.4%

MIDDLE EAST 60.9 149 8.2%

AMERICAS 149.7 248 13.7%

ASIA PACIFIC 204 535 29.6%

EUROPE 475.3 744 41.1%

Source: UNWTO
GLOBAL INVESTOR 2.13 —46

URBAN CRAWL

new
mobility
models
needed
The appeal of cities is unstoppable, and half the world’s population now lives in urban surroundings.
Traffic in some cities regularly slows to a crawl, while noise and air pollution reduce the quality
of life. With more and more people crowding themselves into a limited space, existing road and
rail links are impeding the expansion of capacities. The situation calls for new solutions.
TEXT Thomas Rühl, Head of Swiss Regional Research, and Andrea Schnell, Research Analyst, Credit Suisse

Developing into an industrial center has transformed Shenzhen
into China’s most densely populated city. The number of private cars
has risen from 1 million to 2.25 million in the last six years alone.
According to the IBM Commuter Pain Index, only Mexico City is less
commuter-friendly. The young Asian metropolis is a good example of
the main problem currently afflicting large cities: jobs in the services
sector are primarily being created in the center and at transportation
hubs, while housing is largely provided in the surrounding agglom-
eration. The capacities of the transportation infrastructure are unable
to keep pace with the enormous growth of the population and com-
muter numbers so that traffic congestion and delays are the order of
the day. Alongside the urban sprawl an “urban crawl” is emerging as
commuters and goods move at a snail’s pace.
Cities as melting pots of ideas and places for the efficient exchange
of knowledge are thus forfeiting their economic strength, while emis-
sions, air pollution, noise and accidents reduce the quality of life of
the inhabitants. Time losses throw a monkey wrench into the works
of cities and impede economic growth. According to Texas A & M, the
average commuter in Washington D.C. loses 67 hours a year sitting
in traffic jams, with corresponding setbacks in terms of recreation,
consumption and working time. Few cities were laid out for major growth
at the outset. New York City is an exception: the Commissioner’s Plan
of 1811 gave Manhattan its characteristic street pattern – the vision-
ary basis for subsequent growth. Cities with medieval structures – such
as the large European cities – were never planned for any similar type
of growth. Capacity expansions are considerably more difficult owing
to the lack of space.
The “smart ” city
The example of Masdar City in Abu Dhabi is an attempt to plan a
climate -neutral and mobility-enhanced city in the open countryside.
As well as the revolutionary supply of energy from renewable sources,
the city was originally planned to be completely car-free. Mobility was
to be ensured largely through public transportation. However, the
introduction of personal driverless “podcars” has now been dismissed
and replaced by electric vehicles. This way, the different mobility needs
of the 50,000 or so planned inhabitants and around 60,000 addi-
tional commuters are to be met. The approach adopted by Masdar
City serves to illustrate both the possibilities and technical and finan-
cial limitations of mobility planning.
The ideal planned city has a secure, reliable, low-emission and
comfortable transportation system for passengers and goods, offer-
ing maximum efficiency. Infrastructure and land use planning need
to be designed in a manner that enables the city to grow further
without resulting in congestion. Most global metropolises are con-
fronted with significantly more complex challenges than Masdar City:
major adjustments to the transportation networks are impossible or
enormously expensive. The most promising enhancement options are
described in the adjacent boxes.
Road to the smart city is a bumpy one
Investments in transportation systems have extremely long-term re-
turns. The risks of opting for the wrong technology are illustrated by
examples such as the failed “future technology” of monorail. Various
cities such as Sydney and Seattle introduced this technology, but
owing to the high investment costs, monorail has been unable
to achieve major success as a mass means of transportation. Differ-
ent incentives for governments, businesses and the scientific >
GLOBAL INVESTOR 2.13 —47
NEW AVENUES: A MOVE IN THE RIGHT DIRECTION
TRAFFIC REDUCTION WITH INCENTIVES
AND TECHNICAL SOLUTIONS
Modern ICT solutions allow people to work anywhere.
Home offices and decentralized, company-independent
shared desks in residential areas help reduce commuting.
For production enterprises, the campus model offers
homes for employees close to the production sites.
TECHNICAL MOBILITY MANAGEMENT
Adaptive control elements (traffic lights, speed limit signs,
lane signs, adaptive public transportation connections
and information apps for passengers, e.g. Hot Stop.com)
can enhance the capacity and reliability of existing road,
bus and rail links. Commuters should be able to plan
in detail the best possible modal split of transportation
means (car, train, bike, foot) depending on the current
traffic situation. Indicators at bus stops and on mobile
phones enable travelers to react to delays and connection
breakdowns. The Future Urban Mobility Project in
Singapore, an example of an integrated mobility manage-
ment project being implemented in cooperation with
the Massachusetts Institute of Technology, is based on real-
time data and a profound understanding of traffic flows.
ECONOMIC MOBILITY MANAGEMENT
The road pricing system in Singapore and carpool lanes
are successful examples of incentive mechanisms to make
roads more efficient for all users. The sharing economy
trend has fostered the emergence of new business models
such as the Mobility car-sharing system in Switzerland,
Barclays Cycle Hire in London and Zimride in San
Francisco. Real-time ridesharing or taxi-sharing based on
mobile phone apps transforms private mobility into
ad hoc public transport models. Data about disruption
is shared by users with other road users via apps such as
Waze.
TECHNICAL INNOVATIONS
The latest developments in IT, sensor and communication
technology mean that new solutions may soon become
reality: interacting vehicles can form “trains” over longer
distances, thereby making road traffic more efficient
and environmentally friendly. Another step is the driver-
less car (e.g. from Google) that allows the driver to
sleep or work during the journey. As the vehicle parks by
itself, parking spaces can be some distance from the
user’s destination, thereby significantly enhancing the
f lexibility of cities in terms of spatial planning.
NEW PUBLIC TRANSPORTATION SYSTEMS
The efficiency of trains can be massively enhanced if they
no longer have to stop. Priestmangoode design consul-
tancy in London proposes a system that allows trams to be
connected to the side of non-stop high-speed trains and
thereby simultaneously combine the role of platform and
local distribution. Further ideas are innovative rail systems
such as the proposed Hyperloop between Los Angeles and
San Francisco, a linear-induction-powered train-in-a-tube.
GLOBAL INVESTOR 2.13 —48

community are exacerbating the problem of selecting a technology.

Furthermore, the Google driverless car serves to exemplify the inno-
vation-hampering impact of regulations and insurance issues:
California had to carry out legal changes prior to the first road test.
The legal consequences in the event of an accident have not been
clarified: Is it the passenger who is liable or the car manufacturer ?
We therefore think that innovative technologies will prevail more among
users (smart vehicles) than among infrastructures (smart roads).
Since the origins of civilization, cities have decisively shaped history.
Mobility and the exchange of ideas are the crucial benefits of cities
and key to the competition for attracting businesses. Cities that
tackle the “urban crawl” will thrive. Those unable to adapt their mobil-
KV[KPHTCUVTWEVWTGVQVJGKTITQYKPIRQRWNCVKQPYKNNWPFGTCEJKGXG Ɓ
Andrea Schnell joined Credit Suisse in 2012 as an economist focusing
on the Swiss economy, particularly locational quality and public
ƟPCPEGU5JGJCUJGNFRQUKVKQPUKPVJGRWDNKEUGEVQTCUYGNNCUKPƟPCP-
EKCNKPUVKVWVKQPUKPENWFKPIVJG5YKUU0CVKQPCN$CPMCPF'6*<WTKEJ
5JGJQNFUC/CUVGTQH5EKGPEGKP$WUKPGUUCPF'EQPQOKEU
Thomas Rühl joined Credit Suisse in 2005 as an economist responsible
HQT5YKUUGEQPQOKECPCN[UKU.GCFKPIVJG5YKUU4GIKQPCN4GUGCTEJ
VGCOHQEWUKPIQPNQECVKQPCNSWCNKV[VTCHƟECPFKPHTCUVTWEVWTGU[UVGOU
and tax competition, he has been a consultant for several Swiss can-
VQPUCPFVJG5YKUU%QPHGFGTCVKQP*GJQNFUC/CUVGTKP'EQPQOKEU

Ring Roads of the World

The graphic on the left is a
composite image consisting
of stacked layers, all in the
same scale, representing
the ring roads surrounding
some 27 international cities.
Houston, Texas, has the
largest such system, with
Beijing, China, coming in
at number two. This award-
winning image, titled Ring
Roads of the World, was
originally created by the
Rice School of Architecture,
located in Houston, Texas.
Source: Thumb Projects

Illustration: Thumb/New York, originally for Rice University School of Architecture

1 mile

Navigating
a megalopolis
The American dream of seamless commutes, suburbia and big cars
has turned into something of a nightmare for many. Architect Eric Höweler
contemplates a radically different model for the USA’s Northeast Corridor.
Richard Hall: How did the
“Shareway 2030 ” project take shape ?
Eric Höweler: Some auto manu-
facturers are realizing that streetscapes
are being transformed to deprioritize
the car and they want to understand
the wider urban context better. So
Audi’s research team asked six archi-
tecture firms to submit “visions” for
the future of urban mobility. We chose
to pitch a remake of the Boston-to-
Washington (BosWash) megaregion
envisioned by Jean Gottmann in his
1961 book, “Megalopolis.”
What exactly is BosWash ?
Eric Höweler: At the heart of
BosWash is the notion that many cities
in the USA are no longer discrete
entities; one metropolitan area often
spills over into the next. The megalop-
olis 1960 s futurists imagined for the
year 2000 is now a reality. Within the
BosWash region, which is now home
to over 53 million people and gener-
ates one -third of the nation’s GDP ,
America developed a number of (sub-)
urban prototypes – cul-de -sacs, strip
malls, drive -thrus – which have been
exported all over the globe. These
experiments are no longer sustainable.
So we tried to reimagine mobility
and collective consumption patterns
in such a megaregion in 2030 .
SHAREWAY 2030
INTERVIEW by Richard Hall
So, it’s an alternative
American dream ?
Eric Höweler: In a way, it is.
Car ownership and the wider narrative
of freedom and social mobility are
certainly intertwined in the USA .
As architects, though, we tried to con-
ceive of urban mobility in its widest
sense. The Shareway encompasses
housing and suburbs, the train/plane/
car/bike interface, “last-mile”
strategies, house sharing and urban
agriculture.
How would the transport
component of Shareway work ?
Eric Höweler: The core consists
of a bundled transit system connecting
public and individual transport to a
single artery running along the
400 -mile stretch of Interstate 95 .
The Shareway is a network of hubs
and pathways (including a high-speed
train running above the I- 95 ) in
which people and cargo would travel
along a “stacked” route. Bundling
allows passengers to switch between
the different transport modes and local
and national transit. To help reduce air
traffic in BosWash and accommodate
larger planes and cargo ships, the
Shareway would link the high-speed
transport network to a multilevel
“Superhub” in Newark.
GLOBAL INVESTOR 2.13 —49
What other innovations
does Shareway propose ?
Eric Höweler: In addition to these
mobility scenarios, we imagined a
“Sharestay” time -share system for
houses where you only pay for the
time you actually spend in a building.
And we experimented with urban
agriculture schemes (“Farmshare”)
and an innovative rotating road
surface (“Tripanel”) that would flip
between city street, park and energy
source. Shareway ultimately aims to
replace isolated, unimodal commutes
and inefficient, dispersed infrastruc-
tures in the BosWash region with
a tightly meshed transport ecosystem
orchestrated by smart software and
social media. In this world, access –
switching and sharing – would matter
more than ownership. Ɓ
Eric Höweler is a registered architect,
architectural writer and co-founder of Höweler
+ Yoon Architecture LLP, an interdisciplinary
FGUKIPCPFTGUGCTEJRTCEVKEG*GKUCNUQ
Assistant Professor at Harvard University’s
)TCFWCVG5EJQQNQH&GUKIPKP$QUVQP75#
GLOBAL INVESTOR 2.13 —50
DISPERSION
How ideas
spread
Every human advance, and what we call culture, relies on the
human capacity to embrace new ideas en masse. But how does that
happen? How does an idea become so compelling that it is worth
sharing? More important, how is it that ideas come to be adopted?
Duncan Watts has made a career of studying how ideas spread.
INTERVIEW by Giselle Weiss
Giselle Weiss: Your early research is asso-
ciated with the wildly popular idea of six “Some things
degrees of separation, which far predates
you. How did that idea spread ? do spread quite
Duncan Watts: I don’t know. But the
notion that we are all connected through a lot … but they
a short chain of acquaintances has been
around for a long time. It shows up in are very rare,
a 1929 short story called “Chains” by the
Hungarian poet Frigyes Karinthy. And one in a million
the urbanist Jane Jacobs speculated about
it in her famous book, “The Death and events.”
Life of Great American Cities.”
They didn’t call it six degrees
of separation, though.
Duncan Watts: No. That label comes
from the title of a Broadway play of the
1990 s by John Guare. The actual history is
a little involved. But in any event, in 1967
psychologist Stanley Milgram set out to test
the idea by having people in Boston deliver
letters to people (“targets”) in Omaha,
Nebraska, through the intermediary of
others known only on a first-name basis.
He found that the average length of the
letter chains that reached the targets was
six. He called it the small world problem.
Where did your research come in?
Duncan Watts: In the 1990 s, I was
studying synchronization among crickets –
who chirps with whom. Then one day
on the phone, my dad asked me whether
I’d ever heard of the idea that everyone
is only six handshakes away from the
president of the United States. It occurred
to me that both problems involved networks,
and that interested me.
What makes the idea so powerful ?
Duncan Watts: We’re attracted to
the Enlightenment idea of ourselves as
independent individuals who decide
what we want to do and go out and do it.
But the reality is that we’re very much
enmeshed in social relations. Everything
we do and care about involves other
people. These are network concepts.
Recently, you’ve been working on the
structure of viral diffusion, for example,
of tweets on Twitter. What’s that about ?
Duncan Watts: We’ve been mapping
the spread of information, particularly
online. When you think about how infor-
mation spreads, it’s natural to liken it
to the spread of a disease. In fact, people
have been doing that for a long time
in marketing. And it’s been popularized
in recent years by people like Malcolm
Gladwell, author of “The Tipping Point,”
who very explicitly draws the analogy
between the spread of behaviors or beliefs
and diseases.
That sounds reasonable.
Duncan Watts: At a certain level,
it is. But it’s tempting to go a step further
and apply the same mathematical models
that have been developed to understand
the spread of a disease to the spread
of ideas or products.
What’s wrong with that ?
Duncan Watts: There are all sorts
of models of how things spread, and they’re
often incompatible with each other. More-
over, we have very little data to test any
of these models. For example, if you want
to trace the spread of an idea, you have
to be able to observe that person A has that
idea, and then that person tells B, and then
person B has the idea, and now person B
tells person C. Mapping this out in a popu-
lation of millions of people with hundreds of
thousands and millions of things to observe
is a tremendously difficult process.
So how do you approach it ?
Duncan Watts: We’ve done a lot of work
using Twitter data – news, media, images –

where we can, to some approximation,
observe everything. And we can also track
exactly where everything is at a given point.
People who study diffusion are generally
looking for a critical threshold where ideas
go from not spreading to spreading like
wildfire.
And what have you found ?
Duncan Watts: Initially, we found that
nothing really spreads like that. In a study of
millions of observations, 99% of everything
that happened, every “adoption” of an
idea, was within one degree of the source.
Which is almost the opposite of spreading.
In other words, I tweet something and
you re-tweet it. Your followers see your
re -tweet, but they don’t do anything.
It’s the re -tweet that we pay attention to.
When we described this result to our
colleagues, however, they often didn’t like it.
Why ?
Duncan Watts: People are convinced
that certain things “go viral,” and that’s what
interests them. So they would say, “We
know some things spread. Look at ‘Gang-
nam Style’ or the use of Hotmail or Face-
book. Maybe you didn’t see anything
spread, but you must only have looked at
things that weren’t any good.” So then we
did a second study where we really looked
at everything on Twitter – a billion obser-
vations – for an entire year. And sure enough,
we found that some things do spread
quite a lot. But they are very rare, one in
a million events. And even they don’t
look like “social epidemics.”
Why not ? Surely “Gangnam Style”
is a social epidemic?
Duncan Watts: Epidemic models
assume that ideas become popular by viral
word of mouth. But in the media world,
information can also spread because some
major channel or site picks it up – it gets
on the front page of Yahoo! or the “New
York Times” or whatever – and a million peo-
ple or a hundred million people see it. And
a bunch of them re -tweet it. That would still
be popular, but we wouldn’t say it had
spread virally. So when something becomes
popular, is it a “broadcast” or is it “viral”?
Intuitively, you might guess one or the
other. But when we looked, we found tre -
mendous diversity: some popular things
are pure broadcasts, and some display
pure viral spreading. We also found about
every conceivable mixture of the two.
There’s no typical way in which things
become popular.
GLOBAL INVESTOR 2.13 —51
“This is not 9JCVFQ[QWTƟPFKPIUVGNN[QW !
Duncan Watts: Unlike diseases, where
about cat videos in general you only have one thing spreading
at a time, in ideas, it’s always a contest.
going viral – Everything that’s spreading on 6YKVVGTKUƟIJV-
ing for oxygen with everything else that’s
it’s about chang- spreading on Twitter. It’s hard to be exposed
to one particular idea because there’s just
ing people’s so much other stuff to pay attention to.
Occasionally something is able to rise above
minds, and their the noise, and everybody hears about it and
pays attention to it. But that is extraordinari-
behavior.” ly rare and somewhat arbitrary. If you’re a
social media strategist or a digital advertis-
ing agency, basing a marketing or other
strategy on triggering a social epidemic is
probably not the best use of your resources.
You are also investigating the nature of
cooperation between people. How is that
related to the spread of ideas?
Duncan Watts: The spread of informa-
tion and the spread of cooperation are both
examples of social influence, so they’re
related, at least in principle. But it’s also im-
portant to understand that different types of
influence are likely to spread in different
ways. Me persuading you to change your
political views is very different from me per-
suading you to click on a video.
How so ?
Duncan Watts: People do not easily
adopt ideas that involve changing their con-
ception of themselves. Not accepting the
idea of climate change might be tied up
with your political ideology, your suspicion
of government and your dislike of elite
intellectual types. When is an idea some-
thing that you can adopt just because it’s
obviously right or obviously interesting?
And when is it something that is going
VQDGXGT[FKHƟEWNVHQT[QWVQCFQRVDGECWUG
it’s tied up with all these other things?
What are the stakes?
Duncan Watts: This is not about cat
videos going viral, even if sometimes that’s
what we study because it’s what we have
the most data about. Really, it’s about
changing people’s minds, and their behav-
ior; and one way or another, everyone –
governments, corporations, marketers, poli-
cymakers – is in the business of trying to
change people’s minds. Understanding how
that happens is one of the big questions
Duncan Watts is a principal researcher at Microsoft of social science. It’s frustrating that we’ve
Research NYC and an A. D. White Professor-at-Large
at Cornell University. From 2000 to 2007, he was been thinking about this for so long and
at Columbia University, then at Yahoo! Research. have very little in the way of concrete an-
He is the author of “Everything is Obvious (Once You
Know the Answer): How Common Sense Fails Us”
swers. But maybe this particular period of
(Crown, 2011). JKUVQT[KUFKHHGTGPV6JCVoUVJGJQRG Ɓ
GLOBAL INVESTOR 2.13 —52

Comparison of Chinese travelers who travel

abroad for business and for leisure

96%
for leisure
52%
for business
and education

Comparison of Chinese travelers who travel independently and those

who travel as part of arranged groups, according to hoteliers

30%
of guests
travel as part
of arranged
groups

70%
of guests travel
independently

Sources of information that Chinese travelers use, and rely on most

Newspapers
16 %

Social media Loyalty schemes Use

Rely on most
27 % 4% 2% 16 %

Travel magazines / brochures Promotions / deals

42 % 6% 8% 35 %

Travel agents Family

46 % 11 % 15 % 45 %

Online accommodation / travel websites Online review sites

50 % 12 % 16 % 47 %
Source: Hotels.com/Pandodaily

Friends Travel guides

60 % 15 % 11 % 55 %
 GLOBAL INVESTOR 2.13 —53

TRAVEL AND TOURISM

The China
travel surge
Thanks to more relaxed government restrictions on foreign travel and the rise
of the Chinese middle class, with higher disposable incomes, Chinese outbound
tourism is enjoying remarkable growth despite the economic slowdown
of recent months. A survey by Hotels.com highlights current trends.
TEXT Scott Booker, president, Hotels.com

According to the China Tourism Academy, China became the world’s
largest outbound tourism market in 2012 , overtaking Germany and
the USA , with an estimated 83 million overseas trips made by Chinese
citizens. That number is estimated to rise to 200 million by 2020 . Ear-
lier this year, the Chinese government published its Outline for Na-
tional Tourism and Leisure, which, among other topics, is aimed at
sparking an increase in outbound tourism by encouraging employers
to promote the use of leave days and also to give Chinese workers
more freedom and flexibility of where and when to travel.
Presently, most outbound travel from China originates in the three
major cities, Shanghai, Beijing and Guangzhou. China plans to build
70 new airports by 2015 and to expand its existing 100 airports. Low-
cost carrier activity and route expansion in Asia continues to increase,
many with China as a key part of their future networking planning. Air
Asia, Scoot by Singapore Airlines, Jetstar, Peach by ANA , Cebu Pa-
cific and others are all helping to build Chinese inbound and outbound
flows. Several airlines have also announced new non-stop long-haul
services to China beginning in 2013 . In 2012 , we carried out our first-
ever Chinese International Travel Monitor (CITM ), examining the im-
pact of the huge growth in Chinese outbound tourism and the re-
sponse by the global hotel industry to benefit from this rapidly
developing trend. The 2013 CITM (http://press.hotels.com/citm/) is
richer in data than last year’s, as we also surveyed 3 , 000 international
travelers from China to gain a better understanding of the consumer’s
viewpoint. The results point to some interesting trends.
Governments paving the way
Many governments around the world are helping to invigorate the mar-
ket by relaxing visa requirements. The China 2020 Strategic Plan is
a core element in the Australian 10 -year tourism strategy. Chinese
visitors to European countries participating in the Schengen agree-
ment only need to have a visa from one of the countries in order to
be able to visit all 26 members comprising 22 EU countries and 4 from
the European Free Trade Association. The UK has pledged to review
the visa application process for Chinese tourists by seeking a joint ap-
plication for the UK and Schengen countries.
Tourist boards are funding aggressive marketing campaigns. For
example, VisitBerlin aims to position Berlin as the most important new
Gateway to Central Europe in the Chinese market and to double the
visitor numbers in two years. Mexico expects to boost the number of
Chinese travelers visiting the country in 2013 by 30 %, helped by a
relaxation in visa restrictions. Russia Tourism Year, with more than 200
events staged in China in 2012 , prompted 343 , 000 Chinese tourists
to visit the country that year, a 47 % increase over the previous year.
Bucking the group trend
China’s international travelers are still among the wealthier of China’s
citizens, with an average yearly household income of RMB 109, 922
( USD 17,752 ) compared with the Chinese average of RMB 49, 920
per year. However, nearly a quarter of travelers have household in-
comes of less than RMB 70 , 000 per year. Nearly all of the Chinese
international travelers surveyed have been abroad for leisure reasons,
while over half have visited other countries for business or educational
purposes. In a growing trend, nearly two-thirds of Chinese travelers
say they prefer to travel independently and not as part of a group. This
development has also been confirmed by hoteliers. Overall, 61% of
hotels say they have seen an increase in the number of independent
Chinese travelers in the past two years. This figure rises to 74% in
the Asia-Pacific region, 69 % in Latin America and 62 % in North
America, but falls to 46 % in Europe. Independent travelers are also >
GLOBAL INVESTOR 2.13 —54

&'2#4674'5
The wish list The reality
 #7564#.+#  75#
 (4#0%'  *10)-10)
Scott Booker is President of Hotels.com, a leading online
 0'9<'#.#0&  6*#+.#0&
accommodation booking website that started as a telephone
UGTXKEGKP6JGƟTUVYGDUKVGYCUNCWPEJGFKPVJG75#KP  75#  ,#2#0
2002. There are now more than 85 Hotels.com sites worldwide.  59+6<'4.#0&  5+0)#214'
Hotels.com is part of the Expedia group.
 5+0)#214'  /#.#;5+#
 *10)-10)  5176*-14'#
 6#+9#0  +6#.;
younger and equally likely to be male or female. Many will have al-
 70+6'&-+0)&1/  (4#0%'
ready studied abroad, and thus are more familiar with how to fit com-
 %#0#&#  #7564#.+#
fortably into a foreign environment. These travelers tend to avoid travel
agents for advice, preferring to use online travel, accommodation and Interested in far away lands, but staying closer to home The top ten
review websites. They also consult a wider range of information destinations Chinese travelers want to travel to compared to the destinations they
actually travel to, based on hotel bookings. Source: Hotels.com
sources before booking. Social media play a much higher role in their
decision-making process. When it comes to accommodation choices,
independent travelers’ decisions are more widespread: three -star ho-
tels followed by four-star, with 10 % plumping for five -star properties;
TOP SPENDERS
but hostels and back-packing establishments and B&Bs are also sig- International
tourism expenditure Population
nificant. As with Chinese travelers as a whole, sightseeing, dining and billion USD millions
Rank 2011 2012 2012
shopping are still the most popular activities when traveling interna-
 %*+0#   
tionally. Nonetheless, cultural attractions such as the theater, concerts,  )'4/#0;   
comedy shows are slightly more appealing to this group.  75#   
 70+6'&-+0)&1/   
Knowing the customer
 4755+#0('&   
Nearly six out of ten travelers state that the ability to accept Chinese  (4#0%'   
payment methods is the single most important offering from interna-  %#0#&#   
tional hotels. With a bias among wealthier travelers, most respondents  ,#2#0   
 #7564#.+#   
choose language -related items, such as translated literature, website,
 +6#.;   
TV programs and newspapers, as among the more important services
a hotel can provide. Also on the wish list, in decreasing order of im-
Top spenders in international tourism: China jumps to first place. In the
portance, are more Mandarin-speaking staff, on-site restaurants serv- last three years, China has vaulted past both Germany and the USA in terms of interna-
ing Chinese food, Chinese breakfast and Chinese room service. tional tourism expenditure. Source: 70961

Many countries now recognize the potential of the Chinese trav-

eler boom. The UN World Tourism Organization has reported that Chi-
nese travelers spent USD 102 billion on international tourism in 2012 , BIG SPENDERS ON HOTELS
40 % more than in 2011 , overtaking Germany and the USA as the Rank
world’s biggest spenders. This remarkable growth in travel in Chinese  0'9<'#.#0&  5176*-14'#
outbound tourism, largely due to more relaxed government restrictions  59+6<'4.#0&  $4#<+.
 ,#2#0  5+0)#214'
on foreign travel and the rise of the Chinese middle class with higher
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disposable income, does not appear to have been impacted by the
 4755+#  70+6'&-+0)&1/
slowdown in overall economic growth seen in China over recent
months. The desire to explore foreign lands and enjoy new experi- Consistently among the big spenders on hotels Countries where Chinese
GPEGUTGOCKPUCUUVTQPICUGXGT Ɓ travelers are among the top spenders on accommodation Source: Hotels.com

Mixing business
and pleasure
)GPGXCoUƟTUVJQVGNJCUUGGPOCP[VTCXGNGTUKPKVUVKOG4GDTCPFGFVJG(QWT5GCUQPU
Hotel des Bergues in 2005, it now caters to the global business and diplomatic community.
,QUÅ5KNXCTGƠGEVUQPVJGGXQNXKPIJQVGNKPFWUVT[VJGPGYOQDKNKV[CPFVJGFKIKVCNYQTNF
Giselle Weiss: What is the single
biggest change you’ve observed in
the hotel industry in recent times ?
José Silva: We are historically a
business hotel. Today, people combine
work and pleasure. It’s no longer
just a matter of going to the gym.
Sightseeing used to be something
leisure guests did. Now you have
a business partner booking an hour
at a museum between meetings,
or going for a bike ride.
What explains the change ?
José Silva: Technology has
transformed people’s business lives.
It is so in our face ! We are always on
the phone, or dealing with e -mail or
checking company websites. Conse-
quently, work and play have merged.
Which nationalities stay at the hotel ?
José Silva: Geneva’s a bit different
from other areas of Switzerland.
So while we do see an uptick in clients
from emerging markets, at present
our base is still primarily Europeans
and North Americans, unlike Interlaken
or St. Moritz, which are more special-
ized. We have 500 international
organizations here, which contributes
to a more global clientele.
And yet India and China each
have over a billion people. When
they start to travel more …
MODERN HOSPITALITY
INTERVIEW by Giselle Weiss
José Silva: … they will change the
nature of the hotel industry. Like
Americans changed the nature of the
hotel industry. You can get eggs
and bacon for breakfast now anywhere
around the world.
What are today’s guests looking for ?
José Silva: Personalization. It used
to be that what people wanted was
choice. So you’d offer a big breakfast
buffet. Now people expect you to
know their preferences, whether
that’s family activities or DVD s. Our
hotel has 115 rooms, and each room
is assigned one of our six personal
assistants who do nothing but
personalize the preferences of every
guest. That kind of service requires
careful observation.
A 2011 report by the IBM Institute for
Business Value, titled “The Personal-
ization Paradox,” cites the power
of social media as a source of informa-
tion about guests’ unique preferences,
but also the challenges it poses.
José Silva: People want personal-
ization, and value the effort we take
to know about them. But we are very
careful to use only information clients
have told us or made public elsewhere.
Is TripAdvisor complicating your life ?
José Silva: TripAdvisor and
distribution channels have obviously
GLOBAL INVESTOR 2.13 —55
drastically changed the world. Instant
value -for-money comparisons can
be done at the tip of a finger. As a
hotelier, you can’t avoid it. And if you
are good at what you do, the in-
creased transparency pays off because
success is rewarded so much faster
than in the past, and sometimes
overnight.
How would you sum up the
significance of mobility for the travel
and tourism industry ?
José Silva: Some people still see
traveling as a nice but expensive
thing to do. In fact, compared with
other human activities, traveling is not
so expensive. It has become part
of entertainment and culture, and it’s
here to stay. Traveling has become
a way of life, a basic need. Ɓ
,QUÅ5KNXCKU)GPGTCN/CPCIGTCVVJG
Four Seasons Hotel des Bergues Geneva.
He previously worked for Four Seasons
KP/QPVTGCN%CPCFCKPKVKCNN[KPVJGHQQF
and beverages division, and later opened
a Four Seasons in Lisbon, Portugal,
before making the move to Switzerland.
Risk disclosure
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Disclosure appendix
Analyst certification
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or view(s) in this report.
Knowledge Process Outsourcing ( KPO) Analysts mentioned in this report are employed by
Credit Suisse Business Analytics ( India) Private Limited.
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Guide to analysis
Relative stock performance
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regional and global benchmark indices.
Absolute stock performance
The stock recommendations are BUY, HOLD and SELL and are dependent on the ex-
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based on the following criteria:
BUY 10% or greater increase in absolute share price
HOLD variation between –10% and +10% in absolute share price
SELL 10% or more decrease in absolute share price
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The bond recommendations are based fundamentally on forecasts for total returns versus
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HOLD Expectation that the bond issue will perform in line with the specified benchmark
SELL Expectation that the bond issue will underperform its specified benchmark
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 Authors
Credit Suisse Global Research

Nikhil Gupta
Thematic Research Analyst

Nikhil Gupta joined Credit Suisse Private Bank-

ing in 2011, and is currently part of the thematic
research team. He has six years of experience,
YJKEJGPEQORCUUGUEQPUWNVKPICPFƟPCPEKCN
research. He is a postgraduate from the Indian
School of Business, Hyderabad.
> Pages 8 – 9, 18 –19, 30 –31, 44 – 45

Uwe Neumann
Senior Equity Analyst

CEFA , joined Credit Suisse Private Banking

in 2000 as an equity analyst responsible
for the telecom and technology sector. He has
28 years of experience in the securities and
banking business, including 18 years in
research. He holds a Master in Economics
from the University of Constance, Germany.
> Page 24–25

Christine Schmid
Head of Global Financials Research

CFA , is Head of Global Financials within the

single security research unit. She has covered
Imprint ƟPCPEKCNUHQT14 years and coordinates the
Credit Suisse AG , Investment Strategy & Research, INQDCNƟPCPEKCNXKGY5JGLQKPGF%TGFKV5WKUUG
P.O. Box 300, CH- 8070 Zurich in 1993 in accounting, and later portfolio
Publisher management. She holds a Master in Econom-
Giles Keating ics from the University of Zurich.
Editors > Page 26 –29
Nilanjan Das, Sara Carnazzi
Editorial deadline Javier Lodeiro
21 October 2013
Equity Research Analyst
Production management
Markus Kleeb, Katharina Schlatter CFA , FRM, joined Credit Suisse in 2010 as an
Concept equity analyst responsible for the global insur-
arnold.kircherburkhardt.ch ance sector and US banks. Javier has 18 years
Design and realization of experience as a buy- and sell-side analyst.
arnold.kircherburkhardt.ch He holds a Master in Economics from the Uni-
Angélique Bolter, Claudia Veit, Maja Davé,
versity of Bern.
&QTKU1DGTPGFGT/CTVKP$NÀVVNGT/QPKMC*ÀƠKIGT
Sacha Steiner, Rahel Frick (project management) > Page 26 –29
Editorial support
arnold.kircherburkhardt.ch Andrea Schnell
Giselle Weiss, Dorothée Enskog, Richard Hall, Robin Scott Research Analyst
Printer
GDZ print, Zurich Joined Credit Suisse in 2012 as an economist
focusing on the Swiss economy, particularly
Copies of this publication may be ordered via your customer
advisor; employees contact Netshop directly. This publication NQECVKQPCNSWCNKV[CPFRWDNKEƟPCPEGU2TGXKQWU-
is available on the Internet at: ly, she held positions in the public sector as
www.credit-suisse.com/globalinvestor YGNNCUKPƟPCPEKCNKPUVKVWVGUKPENWFKPIVJG
Intranet access for employees of Credit Suisse Group:
http://research.csintra.net
Swiss National Bank, and as a researcher at
International research support is provided by Credit Suisse’s ETH Zurich. She holds a Master of Science in
INQDCNPGVYQTMQHTGRTGUGPVCVKXGQHƟEGU Business and Economics from the University
of Basel.
Cover photo: Mathias Hofstetter
Cover inside: Matteo Rinaldi / Gettyimages > Page 46 – 48
Illustrations: Martin Mörck
Thomas Rühl
Head of Swiss Regional Research

Joined Credit Suisse in 2005 as an economist

providing Swiss economic analysis. He leads
the Swiss Regional Research team, focusing
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systems, tax competition, regional business
PERFOR MANCE
E[ENGC PCN[UKUCPFRWDNKEƟPCPEGU*GJCUJGNF
consulting mandates for several Swiss cantons
neutral and the Swiss Confederation. He holds a Mas-
Printed Matter ter in Economics from the University of Zurich.
No. 01-13-865170 – www.myclimate.org
© myclimate – The Climate Protection Partnership > Page 46 – 48
ƒ Order GI
Global Investor provides background analyses on current topics, as well as long-term
trends and their possible effects on financial markets and investments. Earlier editions
of Global Investor have addressed the following topics, among others:

You can order these research publications at www.credit-suisse.com/shop (Publication Shop).

Beside the above-mentioned issues, you can also order or download issues of Global Investor covering
other investment themes, as well as a wide range of interesting reports and handbooks.

GI 2.09 GI 1.10 GI 2.10 GI 1.11

Global megatrends +PƠCVKQP Urbanization Emotions and markets

Over coming decades, the (QNNQYKPIVJGINQDCNƟPCP- In the advanced countries, #NOQUVGXGT[QPGKUKPƠW-

impact of megatrends on cial crisis, governments 80 % of the population enced by behavioral traits
global economic growth, and central banks took lives in urban centers. that obstruct the cold logic
VTCFGCPFECRKVCNƠQYU drastic steps to stabilize Worldwide the share is of rational investment
companies, and the stance VJGƟPCPEKCNU[UVGO 50 %, and by 2050 it will goals. Who can honestly
of policymakers and regula- But there are risks arising likely be two thirds. Cities say they are as willing
tors will be profound. We from government inter- of all kinds will remain to sell an asset at a loss as
are now focusing on the vention, such as the the key locus of wealth they are to sell one at a
massive forces of change TGUWTIGPEGQHKPƠCVKQP creation. Where wealth is RTQƟVGXGPKHVJGHWVWTG
unleashed by the rise QTKPETGCUGFƟUECNKO on the rise, the demand outlook is the same for
of a multipolar world, by de- balances in the developed for diverse consumer ser- DQVJ!9JQKUTGCNN[KO-
mographics and by pressing economies. Thus, inves- vices steadily increases. mune from collective panic
issues of sustain ability and tors may face consider- The drivers of successful QTEQNNGEVKXGGWRJQTKC!
human powers of inventive- able market volatility urbanization – from high- Academic studies have
ness. This edition of Global going forward. To restore quality transport infra- sought to understand how
Investor explores how these stability, governments structure and modern such behavioral factors
megatrends will play out, CPFVJGƟPCPEKCNKPFWUVT[ telecommunications to the drive markets. Investment
where the opportunities lie YKNNPGGFVQƟPFEQQRGT provision of innovative professionals have used
and which old certainties ative and global solutions. cultural services – may these insights to try to
could fall by the wayside. A failure to do so could offer exciting opportuni- improve their judgments
result in a prolonged ties for astute investors. about where the market
period of economic – is going.
and political – disorder.
 Global Investor 2.12, November 2012 Global Investor 1.13, June 2013
Expert know-how for Credit Suisse investment clients Expert know-how for Credit Suisse investment clients

Healthcare Big Data

Entering the digital era Taking a quantum leap

Bernardino Fantini It’s a long way from hand washing to the Human
Genome Project. Dr. Devi Shettyy A visit with a cardiac surgeon who has
big ideas – and a bigger heart. S. Yunkapp Kwankam How healthcare
is just a phone call away. José Gómez-Márquez
q Clever minds are hard
at work engineering better healthcare.
Michael Chui The race is on to capture value and gain insight – by looking for
the diamonds in the proverbial data haystack. Florian Michahelles Big Data
enables decision-making based purely on the data, not opinion or experience.
Katyy Börner Her data-based cartography helps us to see and recognize
g Galler Big Data analytics is shaping
TGCNYQTNFTGNCVKQPUJKRUƟTUVJCPFJürgen
TGCNYQTNFTGNCVKQPUJKRUƟTUVJCPF
the future of almost every industry: Quo imus?

GI 2.11 GI 1.12 GI 2.12 GI 1.13

Inheritance Design Healthcare Big Data

In the face of slowing Great design in business Across the vast universe Companies have always
economic growth, inherited goes beyond innovation of modern global health- needed to know their
wealth could regain some and marketing to create an care, probably the single customers, and doctors
of its former primacy. icon that sells itself. most important driver of have always needed to
The many facets of inheri- Successful design can change, with the greatest know their patients. Big
tance range from assets turn a small company into potential for innovation, is Data provides a way for
and institutions to the a big one, a struggling information and communi- them to do this on a scale
passing on of ideas to second-ranker into a cation technology. Exam- and speed that are vastly
future generations. In the dominant player. A few ples range from using larger and faster than
latest edition of Credit designs are timeless. genomics and computers could ever have been con-
Suisse’s Global Investor, /QUVJQYGXGTƟVYKVJC to simulate disease treat- ceived in the past – and
a roster of expert authors certain Zeitgeist or stage ment and outcomes, to that can detect previously
and Credit Suisse special- of technology. When making patients partners invisible connections
ists look at the effects that passes, the company in their own healthcare, between diverse aspects
of inheritance on people, may be weakened if it to designing low-cost of people’s commercial,
society and economies. cannot repeat the design medical tools in resource- medical and social lives.
success. poor settings.
Expert know-how for investors
www.credit-suisse.com/globalinvestor
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Demographics

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