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Global Investor 2.

13, November 2013

Expert know-how for Credit Suisse investment clients

New Mobility
Easing global gridlock
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explores the New Mobility. Be it just
up the street, across the continent,
or around the world, we’re moving in
new directions.

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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




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
GLOBAL INVESTOR 2.13 Contents—05

New Mobility

06 36
The New Mobility (Un)equal opportunity
Information technologies are reconfiguring the way we travel, Earnings mobility is something that citizens of all the rich
work and communicate. Giles Keating explores how the New countries value. Miles Corak examines the roles that socio-
Mobility will impact economic growth. economic background and education play in that regard.

10 38
Migration: Good or bad ? Managing migration
Is international migration posing a problem, or rather a solution? National migration policies are a complex matrix where demo-
Ian Goldin separates fact from fiction, providing a deeper graphics and economics intersect. Martina Lubyová explores
understanding of a complex topic. the topic of managing labor mobility in a globalized world.

14 46
New mobility models needed
Top shots on the move Urban streets are chronically congested, slowing commuters
Global Investor presents a collection of portraits featuring ten and goods while choking residents with pollution.
top shots from around the world. Find out where they are Andrea Schnell and Thomas Rühl present some new solutions
from, and where they are deployed. Each is unique, but what to what has become a long-standing problem.
is it that they all have in common?

20 50
How ideas spread
Keeping cities moving If there’s something worth sharing, Duncan Watts wants to
According to Dario Hidalgo, as cities continue to expand, know about it. He’s made a career of studying how and why it
the need for effective mass rapid transit becomes all the more is that some ideas get passed up, passed along or “go viral.”
important. He explains why more roads aren’t the answer.

24 52
The China travel surge
So far, yet so near Tourism from China is booming – to such a degree that
With over a billion smartphone users, mobile technologies are China plans to build 70 new airports by 2015 . Scott Booker
already transformative. But, says Uwe Neumann, the real boom reports on the travel explosion that was worth USD 102 billion
comes once people, processes, things and data are all linked. last year.

26 Disclaimer > Page 56

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.

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.

Podcast on


The New
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- abroad to work temporarily rather than permanently, in
ity, affecting people, traffic and ideas. First, new cheap places such as Hong Kong, Singapore and the Gulf. Javier
ways to transfer small sums of money across borders and Lodeiro and Christine Schmid analyze the growth of these
almost free international communication (Skype, Face- money flows on page 26.
book ...) are now combining with low-cost long-haul air Large numbers of people also travel from the former
travel to change mass migration from the traditional Soviet Republics to get temporary work in Russia. As an
model of lifelong upheaval to a new era in which mass example, in Tajikistan this brings in income worth almost
migration can be temporary, and close contact with home half of domestic output, the world’s highest figure. Mar-
is retained. Second, the application of modern informa- tina Lubyová (page 38) provides color on both the benefits
tion-based control systems to the old technologies of and problems faced by Russia as it receives these large
automobiles, bicycles and public transport promises a numbers of temporary workers. Gulf states Dubai and
revolution in urban and eventually interurban transport, Qatar rely heavily on temporary workers from the sub-
squeezing far more passenger journeys from existing over- continent to fuel all levels of their economy from construc-
stretched infrastructure. Third, Internet-based learning, tion and domestic service to fund management, while,
still in its infancy but growing rapidly, has the potential within Europe, London is a clear temporary migration
to reach vast numbers of people, greatly magnifying the hot spot.
social mobility that education brings. Taken together, we
Modern telecommunications ease pain of leaving home
call these three phenomena “The New Mobility.”
The changing shape of migration is difficult to measure Physical separation from family and friends will always
directly, but some telltale indicators give an idea of what be an issue, but modern telecommunications mitigate its
is happening. In the Philippines, one-tenth of national effects substantially. Long-distance international phone
income is now earned abroad and sent home to help sup- calls now cost pennies – barely two decades ago, they were
port children and other family members. Much of this an almost unaffordable luxury for people on low incomes.
money seems to come from people who have traveled And seeing people at a distance, largely the preserve of
expensive corporate videoconferences ten years ago, is Darío Hidalgo on page 20) can help, but a broader solution
now available via Internet street cafés across emerging is to use information technology to increase the passen-
countries using Skype, while low-end cell phones help ger-carrying capacity of a given road system. This has the
spread messaging systems like WhatsApp (which send potential to be far cheaper and less disruptive than mas-
text, photos and audio clips) toward the lower end of the sive physical construction programs.
income scale. Arguably, the impact of these changes in Education is often seen as key to social mobility, but
boosting temporary migration is only just beginning. this does not apply everywhere. Miles Corak (page 36)
shows that poor education often persists across gen-
erations in developed countries, while Pedro Conceição
“Physical separation (page 32) shows that in sub-Saharan Africa, education does

from family and friends will not necessarily mean getting a job. Could the New Mobil-
ity help? It could allow adults to use Internet learning to
always be an issue, but catch up on skills they missed at school, and it could help

modern telecommunications educated young Africans to find worthwhile work abroad

for a while, without having to leave home permanently.
mitigate its effects Already, Internet-based learning is growing rapidly. Lec-
tures by professors from top universities are now available
substantially.” to a worldwide audience and online courses like those
offered by Rosetta Stone provide an intuitive and yet rigor-
Going abroad to work for a while can bring substantial ous way to learn new languages. Even social networks play
economic benefits. For example, in the Philippines, in- a role, complementing formal education by spreading key
come from abroad has risen consistently for 15 years, pro- ideas, as analyzed by Duncan Watts (page 50).
viding support even when the domestic economy was slow- Economic growth has slowed recently in many emerg-
ing down. Of course, there are adverse effects as well, and ing countries and their stock markets have seen periods
both good and bad effects have been widely analyzed for of major underperformance. The New Mobility may help
traditional (permanent) migration, as described by Profes- offer solutions. It can bring relief to the urban gridlock
sor Ian Goldin in his excellent article on page 10. The that is inhibiting development; it can help to boost con-
newer phenomenon of temporary mass migration is clear- sumption by opening new income streams from local
ly more flexible and so should be able to offer a better people who are temporarily working abroad, while boost-
balance of good effects compared to bad. We believe that ing labor supply in other places where it is needed; and it
it will grow in scale, as the cost of sending money home may also be able to help relieve educational bottlenecks.
falls further, cheap airfares proliferate, and services like All this can be helpful for growth in developed countries
Skype become even more widely used. as well. Crucially, it is not just that the technologies are
there to do this; it is also that the economic incentives to
A need for multimodal transit and smarter planning
apply those technologies are rising. ●
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- Giles Keating is Global Head of Research and Deputy
Global CIO for Credit Suisse. His team conducts the
cusses their application to interurban travel. With traffic fundamental research key to the investment process
in cities such as Jakarta, Beijing, Mumbai and Manila for Credit Suisse clients. As Deputy CIO he plays
a core role in those investment decisions. He joined
clearly a major constraint on economic growth and high- Credit Suisse over 25 years ago and has degrees
ly pollutive, and mass transit systems expensive and dis- from the London School of Economics and Oxford,
where he is an Honorary Fellow. He is chair of
ruptive to build, a new approach is badly needed. Cost- Tech4All and techfortrade, charities aiming to reduce
effective solutions such as bus-ways (see the interview with poverty via use of technology.


Chapter I 1,000,000

MODERN 500,000

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

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


in millions, 2013 LOS ANGELES

USA 45,785,090
GERMANY 9,845,244
UNITED ARAB EMIRATES 7,826,981 Cities with 1 million or more
UNITED KINGDOM 7,824,131 foreign-born residents

FRANCE 7,439,086
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
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
COUNTRIES OF THE WORLD DUBAI United Arab Emirates CUBA 1,201,164
INDIA 14,179,627
JIDDAH Saudi Arabia
MEXICO 13,201,181
LONDON United Kingdom
CHINA 9,333,211
BANGLADESH 7,725,622
PAKISTAN 5,617,297
UKRAINE 5,552,689
PARIS France
RIYADH Saudi Arabia
Source: UN DESA SYDNEY Australia

Source: MPI
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


40 %
30 %
20 %
10 % 9

1990 2000 2010 2013

Source: UN DESA








Population: 28,829,000 AUSTRALIA
DUBAI Immigrants: 9,060,433
31.4% of population
RIYADH Migrant native countries
INDIA 1,761,857 SYDNEY
BANGLADESH 1,309,004
EGYPT 1,298,388
SUDAN 234,564

> 20% 10 –20% 1–10% < 1%

International migrant stock as a

percentage of the total population

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
and Switzerland are non-nationals. CHINA 447,407
INDIA 364,764
ITALY 231,650
Source: UN DESA VIETNAM 225,749


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
Ian Goldin is Professor and Director of the Oxford Martin
migration of the 19 th century, up to one -third of parts of Europe School and Professor of Globalization and Development
emigrated and over a quarter of the population of the USA were im- at the University of Oxford. This article draws on his widely
acclaimed book “Exceptional People: How Migration
migrants. While the share of our societies that are migrants may well 5JCRGF1WT9QTNFCPF9KNN&GƟPG1WT(WVWTGqRWDNKUJGF
be lower today than in previous centuries, the number of migrants by Princeton University Press in 2012.
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- cross-border movement: economic, student, social and refugee/asy-
try – such as the Soviet Union – are now recorded as migrants. But lum. There are around 5 million economic migrants each year. High-
not only has the number of countries quadrupled over the past cen- skill migrants bring special talents or training across borders to fill
tury, so too has the number of people to more than seven billion gaps in the native workforce. Low-skill migrants tend to fill short-
people. More borders and more people result in more migrants, even ages in physical labor or jobs that are less desired by the native labor
if their relative contribution to our populations or economies declines. force. About 3.5 million students migrate each year. While some
At the end of 2012 , three out of four migrants live in a small group countries, such as the UK , insist that students leave, others such as
of 24 countries, with the USA being the most significant home for Australia and the USA have gained talent by allowing certain students
migrants. Approximately 70 million migrants have migrated from one to stay. For example, 68 % of foreign students who received doctor-
developing country to another, and approximately 65 million have gone ates in the USA in 2000 were still there five years after graduation.
from developing to richer countries, with about 55 million migrants Social and family reasons account for about 2 million migrants a year,
having moved between the different OECD countries, and a rapidly as individuals and families aim to be reunited with loved ones. This is
growing number – currently around 20 million – having left the OECD most common in the nations built largely by more recent generations
for emerging markets, where job opportunities are multiplying most of immigrants (the USA , Canada and Australia) as well as the former
rapidly. The European Union is the world’s largest experiment with colonial empires (especially the United Kingdom and France). Conflict
visa-free labor migration. Even though emigration from compara- and persecution push people from their homes and across borders.
tively less rich countries such as Romania and Poland was substantial, Refugee and asylum seekers account for an average of about two
Germany, Italy and the UK were both leading sources and leading million migrants per year. At the end of 2012 there were 15.4 million
recipients of migration. The main lesson from Europe is how few officially recognized refugees worldwide, with 80 % of these refugees
people migrate, with migration levels seldom much higher than those hosted by developing countries, up from 70 % ten years ago. It is
in the periods when greater restrictions applied. Given the levels of impossible to know how many undocumented migrants there are
youth unemployment of over 50 % in Greece and Spain, it is remark- in the world, but in the USA the estimates are that there are about
able that so few young people have migrated. This highlights how the 11 million out of a total number of around 50 million migrants, or about
arguments around migration are often driven by fear rather than facts. 22 % of the total.
Opportunities regarding employment as well as housing and other key By the mid-1990 s, more than 30 % of documented migrants into
determinants of demand are at least as important as the supply-side the USA were highly skilled. Similar trends exist in Europe. Germany
push factors that contribute to migration. launched a “green card” program in 2000 to entice workers to fill gaps
in labor, particularly in healthcare and information technology. Concur-
Why do they go?
rently, France worked to attract scholars, scientists and computer
It is dangerous to generalize about migration. Of the annual flow of professionals. As a result, the percentage of skilled migrants into
around 15 million migrants, most fit into one of four categories of EU countries climbed from 15% in the early 1990 s to 36 % in the >

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-

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


The Silicon Valley

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

United Kingdom
Silicon Valley

New England

S. California

NY Metro

Venture capital amount
of global VC funding
Source: Ernst & Young
Vivek Wadhwa holds research positions
WPKXGTUKV[ ECORWU+P 5KNKEQP 8CNNG[VJGTG CTG PGVYQTMKPI among others, and is the author of
“The Immigrant Exodus: Why America
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


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.


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.
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.

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.


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.

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

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%

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
details on our
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

28.9% 11.9%

Switzerland Germany

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

Chapter II
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
page 26

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



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


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
Change in mobile subscriptions per 100 people
in 2012 compared to 2007

> 60 40 – 60 20 – 40 < 20

Source: UN, World Bank

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

the last 12 months
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.
Source: Statista/massolution PARIS France 60.0
Source: WorldBank
STUTTGART Germany 59.9
COLOGNE Germany 56.8
GHENT Belgium 54.8

Source: Inrix

Western Europe







Total 46.4




Middle East and Africa


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

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.

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
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
Dario Hidalgo has spent the last 24 years helping local
and national governments in Latin America, Asia and Africa China. We also work with researchers from
plan sustainable public transport systems. He publishes Chile, USA , Portugal and Australia via the
regularly in academic journals and holds training courses
worldwide. Dr. Hidalgo is based at NGO EMBARQ’sQHƟEG
ALC - BRT Centre of Excellence (,
in Bogotá, Colombia. and support 30 Latin American transit
agencies in their quest for quality and
integration ( On-site
Richard Hall: How did you get into Can you describe some of the typical pitfalls meetings are particularly important when
mass rapid transit ( MRT ) and bus rapid you face when building a BRT network ? it comes to convincing decision makers.
transit ( BRT )? Dario Hidalgo: Experience around the Where are the biggest BRT projects today ?
Dario Hidalgo: After completing a PhD in globe shows the great potential of BRT, but Dario Hidalgo: The construction of a
urban transport planning in 1997, I joined planning, financing and organizational diffi- 150 km BRT network in Rio de Janeiro in
Mayor Enrique Peñalosa’s team and worked culties should not be papered over. The im- preparation for the FIFA World Cup and
on planning the TransMilenio bus system portant thing is not to rush into implementa- 2016 Summer Olympics, and the expansion
in Bogotá. The government had initially want- tion until all the planning has been thought of Metrobús in Mexico City from 95 to 200 km
ed a metro, but it became clear that a BRT through. Also, every city is unique, so copy/ are two notable examples. The introduction
network could be built more quickly and at paste doesn’t work. Most of the obstacles of BRT in Mumbai and Bangalore may be
lower cost. It was part of a large -scale ur- are institutional rather than technical. Such among the most challenging, and capacity
ban transformation in my home city and was projects are inherently complex as they enhancements in the saturated corridors of
an instant success. I have since been in- involve aligning a baffling array of interests. Bogotá and Istanbul will certainly be major
volved in more than 20 projects worldwide – Strong political leadership and well-crafted undertakings. We expect around 30 cities
including in cities in Mexico and others as communications are essential. One of the to introduce BRTKPVJGPGZVƟXG[GCTU
diverse as Lima, Accra, Istanbul and Indore. big advantages of BRT systems is that they primarily in Asia – but also, in the near
The TransMilenio BRT project in Bogotá can frequently be realized within an elected future, Africa.
has become quite famous. Why ? leader’s term of office. How is MRT/ BRT changing mobility
Dario Hidalgo: TransMilenio is a low- A new report written by the Institute for patterns in both the
cost, high-impact system. The first phase Transportation and Development Policy and developed and developing world ?
(40 km) was completed in just three years EMBARQ is titled “The Life and Death of Dario Hidalgo: We have observed a
(1998 – 2000). It captured international at- Urban Highways.” Your thoughts? cultural shift in Europe and, increasingly,
tention due to its high capacity – more than Dario Hidalgo: Traditionally, urban trans- the USA . People used to aspire to live in a
40,000 passengers per hour, per direction – port planning has been all about moving house in the suburbs and commute. Today,
and an innovative public-private partnership cars, not necessarily people. As a result, more and more people want to live in the
model. The city builds the infrastructure, and most cities in the world have focused on city itself – in denser, mixed-use areas.
local entrepreneurs (currently seven groups expanding road networks. The result has We don’t know how this trend will evolve in
with nearly 2,000 buses) own and operate
Today the BRT is 106 km long and carries
more than two million passengers a day.
Its success helped mainstream the concept “Urban transport planning
worldwide. Our database
indicates that 150 cities have BRT and bus has been all about moving cars,
corridors; 115 of these have been created
since 2000. not necessarily people.”

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- than ownership is emerging thanks to becoming available on mobile devices. I see
ning provides an excellent opportunity to social networks and car-sharing programs. these technologies being further integrated
influence the future shape of cities. Places In Latin America, on the other hand, we see CPFTGƟPGFTCVJGTVJCPUQOGICOGEJCPI-
such as Copenhagen, Curitiba and Singa- the opposite trend: a growing middle class ing innovation turning everything on its head.
pore show how successful strategies that is now able to own more cars and motorcy- Can you describe your most unusual
dovetail land use and transport planning cles, and public transport usage is declining MRT/ BRT journeys?
can be. We must adapt these models to fit in most cities. The key in Latin America is Dario Hidalgo: Crossing the Bosporus
the needs of rapidly emerging economies. to improve service and safety, which may Strait and jumping on and off the fast and
This needs to happen fast before car-cen- require subsidies, and to introduce conges- frequent Istanbul Metrobüs; gliding through
tric urban sprawl takes root. Interestingly, tion charging and parking management The Strip in Las Vegas on a shiny golden
the Chinese cities of Wuhan and Hangzhou schemes. bus-cum-tram; and rattling through hectic
have set up the two largest bike -sharing How do you see the future of MRT/ BRT as and historic Mexico City in a hybrid bus.
programs in the world ( 90, 000 and 60, 000 cities expand and technology develops? My most surreal experience was sharing
bicycles, respectively). Hangzhou plans to Dario Hidalgo: Some of the key innova- a train carriage with 700 -plus people in
expand to 175, 000 bikes by 2020. It’s a tions are in vehicle technology. Trains are Mumbai, which has the world’s highest
leads the world in metro systems, with are catching up with cleaner propulsion
Beijing and Shanghai already surpassing technologies such as natural gas and hybrid
Photo: Institute for Transportation & Development Policy

London as the longest networks. electric. The overarching goal must be to

Public transport usage is very high in create multimodal, integrated public-trans-
Latin America. In US cities, it accounts for port networks with “last mile” connectivity
just 3 %– 4% of urban trips. How do to onward transit services as well as car and
you see this evolving? bike sharing. Mobile user interfaces, which
Dario Hidalgo: Transit ridership is grow- are improving all the time as smartphone
ing rapidly in the USA . More people are penetration rises, play an increasingly
choosing urban lifestyles. In the major ur- important role here. Smart ticketing systems,
ban centers a culture of membership rather including electronic purses, are likewise


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

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-
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
face -to-face in the real world when we move beyond the

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



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




This company is active in offering a peer-to-peer social A highly successful example of how to succeed in a devel-
network in the USA that brings borrowers and investors oping country with mobile money technology is Kenya’s
together online and leaves the banks out of the picture. M-PESA, which is used by 40% of the country’s adult pop-
Lending Club checks the borrower’s request for a loan, ulation. The number of domestic transactions now exceeds
based on the information submitted, and assigns the loan Western Union’s transactions worldwide, making up 17%
with respective interest payments if approved. The inves- of Kenya’s GDP in 2011. The system is based on an idea
tors buy “Notes” which represent a portion of a loan. from Vodafone whose affiliate Safaricom cooperated with
The company earns money by collecting small fees from the Central Bank of Kenya and successfully recognized the
both the borrower (one-time processing fee) and investors ability of mobile phones to lower the costs of transactions
(service fee). For the low 10% of applications that are for poor people. Without even visiting a bank, customers
successfully granted a loan (thus implying a focus are able to deposit cash, exchange it for electronic value
on creditworthy borrowers), the result is lower rates at retail outlets such as gas stations, and withdraw or use
and quicker processing, while lenders obtain higher it for payments if desired. The company has capitalized
rates. As such, investors have earned an average net on strong latent demand for domestic remittances, a lack
annualized return of over 9.5% since 2007. 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


























Thus, the final savings in remittance fees over the five -year period
would exceed USD 9 billion by 2014 .
costs have contracted by 9.8 % since 2008 (and by 15.9 % if special-
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
loans for projects and ultimately fund the economy using new technol-
ogy to circumvent the lack of traditional banks. C/CUVGTKP'EQPQOKEUHTQOVJG7PKXGTUKV[QH<WTKEJ
insurance sector and USDCPMU,CXKGTJCU[GCTU
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-
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
on page 18
Low Middle High information
Inequality of economic
opportunity index


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.


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



page 36



page 38 U




The proportion of recent migrants to OECD countries holding


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








ITALY After taxes and transfers, the richest
SPAIN 10% of the population in OECD
countries earned 9.8 times the Multiplier
income of the poorest 10% in 2010, 10.0 8.9

with the largest gaps recorded

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



FINLAND Belgium.

Sources: Economist/OECD Source: OECD

Amount of Native scientists
immigrated scientists going abroad

% %
Other Other
origins destinations


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.

Source: IEEE Spectrum








































































13.1 13.6

10.8 10.7 10.7

10.0 10.2
9.1 9.3

7.7 8.0



6.9 6.7
6.0 6.1 5.6 6.0
5.3 5.4











ahead in
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

Malawi Phoya, an author and blogger,

takes a few minutes out to relax in his
office in the center of the city in Blantyre.

general, in a country like the USA , the

p+P#HTKECVYQQWVQHƟXGUVWFGPVU higher the level of education, the higher the

drop out of primary school.”

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

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

and coal. Companies there need people many countries in East and Southeast
and skills that are not available. As a result, Asia. But industrial activities are being
workers are coming from outside the squeezed between nonproductive agricul-
continent, less so from other countries in tural expansion and low-value -added
Africa. In general, moving around Africa services. Moreover, the problem of indirect
is difficult everywhere. costs – such as good roads and a stable
What are the challenges to creating power supply – makes it very tough
greater mobility through education? for manufacturing to progress in Africa.
Pedro Conceição: The key challenge is Yet it must progress to create the
to ensure that children master basic literacy high- or even decent-paying jobs that
and numeracy skills. For this to happen, we 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).

0.5 Association Italy United Kingdom
between parent
and child earnings


New Zealand
Canada Australia


0.1 2
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.


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

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 or on Twitter@MilesCorak.

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


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

Home may be where the heart is,

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

0 KM
1,8 5


Photos: Patrick Zachmann/Magnum Photos



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.

“Most national legal residence and working status, it does not provide access to
social benefits or insurance.

immigration policies
Owing to the dire state of their economies, countries such as Spain,
Greece and Portugal have reduced their budgets for measures aimed

are geared toward

at promoting labor market integration of migrants. At the same time,
in 2011 and 2012 , Spain enacted new measures aimed at providing

managing migrant
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
ƠQYUYKVJVJGRTKOCT[ year, and extended voting rights to migrants. In the face of a con-
tinuing weak labor market, Portugal’s new National Integration Plan

goal of securing promotes rights and training for immigrants.

In 2011, Denmark reversed its decade -long trend toward stricter

economic growth.” 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-
attract new skilled migrants. Indeed, the German government an- sequences of population aging and decline. Developing countries
nounced in July 2013 that it had already issued 8,879 cards. that cannot generate sufficient job opportunities use emigration as
Not all migration takes place between nations. Especially in large, a valve for excess labor or as a source of remittances. While today
emerging market countries where the level of local development migration policies are primarily governed by immediate economic
dictates job opportunities and needs, policies reflect the efforts of concerns, their long-term consequences will mainly concern the
governments to direct the flow of labor from region to region. In social sphere. Successful integration of foreign populations and
China, for example, the “hukou” (household registration) system per- building inclusive multicultural societies should thus be a priority of
sists as a means of pumping low-cost rural labor into the country’s VJGINQDCNOKITCVKQPCIGPFC Ɓ
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 /CTVKPC.WD[QX½ is Director of the Institute of Forecast-
majority of immigrants must have a work permit, for which there is a KPICVVJG5NQXCM#ECFGO[QH5EKGPEGUKP$TCVKUNCXC
and Associated Fellow at CERGE- EI in Prague. She
quota. Many migrants thus end up in the shadow economy. In 2010 completed her PhD at CERGE- EI in 2002 and worked at
the Russian authorities introduced so-called patents for illegal migrant the International Labor Organization’s Sub-regional
workers who work for private households, primarily as gardeners, and Central Asia. She is a co-author of the OECD’s
drivers, cooks and housemaids. While the purchase of a patent grants International Migration Outlook 2013.

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

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

Percentage of population living in urban

areas exceeding 100,000 people


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%


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


The global travel and tourism (T&T) sector today employs nearly MEXICO
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

2,437 EU




6, 5 8






AS T 7 5 BE
4, RIB
8 5 LE E
4 6 3 M ID D
1 A
1, 4 A F R IC Countries forecast to have
1 ,6 8 9 the most developed high-speed
train lines in 2025
9,8 2
SO UTH China, Japan and Spain have the
densest high-speed rail networks in use
today – lines where trains can travel

at more than 250 kilometers per hour.


In 2025, the number of high-speed lines


is forecast to have more than doubled


worldwide to 51,677 kilometers.


Worldwide high-speed train lines in 2013,

Source: Oxford Economics in kilometers

IN OPERATION = 21,365 km
PLANNED = 16,347 km
2025 = 51,677 km
Source: UIC

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

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

TURKEY = 2,805 KM
in China 281%


62% URBAN 73% URBAN JAPAN = 3,622 KM
CHINA = 22,619 KM




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


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 NEW AVENUES: A MOVE IN THE RIGHT DIRECTION
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 TRAFFIC REDUCTION WITH INCENTIVES
commuter-friendly. The young Asian metropolis is a good example of AND TECHNICAL SOLUTIONS
the main problem currently afflicting large cities: jobs in the services
Modern ICT solutions allow people to work anywhere.
sector are primarily being created in the center and at transportation Home offices and decentralized, company-independent
hubs, while housing is largely provided in the surrounding agglom- shared desks in residential areas help reduce commuting.
eration. The capacities of the transportation infrastructure are unable For production enterprises, the campus model offers
homes for employees close to the production sites.
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 Adaptive control elements (traffic lights, speed limit signs,
of knowledge are thus forfeiting their economic strength, while emis- lane signs, adaptive public transportation connections
sions, air pollution, noise and accidents reduce the quality of life of and information apps for passengers, e.g. Hot
can enhance the capacity and reliability of existing road,
the inhabitants. Time losses throw a monkey wrench into the works bus and rail links. Commuters should be able to plan
of cities and impede economic growth. According to Texas A & M, the in detail the best possible modal split of transportation
average commuter in Washington D.C. loses 67 hours a year sitting means (car, train, bike, foot) depending on the current
traffic situation. Indicators at bus stops and on mobile
in traffic jams, with corresponding setbacks in terms of recreation, phones enable travelers to react to delays and connection
consumption and working time. Few cities were laid out for major growth breakdowns. The Future Urban Mobility Project in
at the outset. New York City is an exception: the Commissioner’s Plan Singapore, an example of an integrated mobility manage-
ment project being implemented in cooperation with
of 1811 gave Manhattan its characteristic street pattern – the vision-
the Massachusetts Institute of Technology, is based on real-
ary basis for subsequent growth. Cities with medieval structures – such time data and a profound understanding of traffic flows.
as the large European cities – were never planned for any similar type
of growth. Capacity expansions are considerably more difficult owing
The “smart ” city The road pricing system in Singapore and carpool lanes
are successful examples of incentive mechanisms to make
The example of Masdar City in Abu Dhabi is an attempt to plan a roads more efficient for all users. The sharing economy
climate -neutral and mobility-enhanced city in the open countryside. trend has fostered the emergence of new business models
As well as the revolutionary supply of energy from renewable sources, such as the Mobility car-sharing system in Switzerland,
Barclays Cycle Hire in London and Zimride in San
the city was originally planned to be completely car-free. Mobility was
Francisco. Real-time ridesharing or taxi-sharing based on
to be ensured largely through public transportation. However, the mobile phone apps transforms private mobility into
introduction of personal driverless “podcars” has now been dismissed ad hoc public transport models. Data about disruption
and replaced by electric vehicles. This way, the different mobility needs is shared by users with other road users via apps such as
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 The latest developments in IT, sensor and communication
comfortable transportation system for passengers and goods, offer- technology mean that new solutions may soon become
reality: interacting vehicles can form “trains” over longer
ing maximum efficiency. Infrastructure and land use planning need
distances, thereby making road traffic more efficient
to be designed in a manner that enables the city to grow further and environmentally friendly. Another step is the driver-
without resulting in congestion. Most global metropolises are con- less car (e.g. from Google) that allows the driver to
fronted with significantly more complex challenges than Masdar City: sleep or work during the journey. As the vehicle parks by
itself, parking spaces can be some distance from the
major adjustments to the transportation networks are impossible or user’s destination, thereby significantly enhancing the
enormously expensive. The most promising enhancement options are f lexibility of cities in terms of spatial planning.
described in the adjacent boxes.

Road to the smart city is a bumpy one

Investments in transportation systems have extremely long-term re-
The efficiency of trains can be massively enhanced if they
turns. The risks of opting for the wrong technology are illustrated by
no longer have to stop. Priestmangoode design consul-
examples such as the failed “future technology” of monorail. Various tancy in London proposes a system that allows trams to be
cities such as Sydney and Seattle introduced this technology, but connected to the side of non-stop high-speed trains and
owing to the high investment costs, monorail has been unable thereby simultaneously combine the role of platform and
local distribution. Further ideas are innovative rail systems
to achieve major success as a mass means of transportation. Differ- such as the proposed Hyperloop between Los Angeles and
ent incentives for governments, businesses and the scientific > San Francisco, a linear-induction-powered train-in-a-tube.

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 Andrea Schnell joined Credit Suisse in 2012 as an economist focusing
on the Swiss economy, particularly locational quality and public
users (smart vehicles) than among infrastructures (smart roads). ƟPCPEGU5JGJCUJGNFRQUKVKQPUKPVJGRWDNKEUGEVQTCUYGNNCUKPƟPCP-
Since the origins of civilization, cities have decisively shaped history. EKCNKPUVKVWVKQPUKPENWFKPIVJG5YKUU0CVKQPCN$CPMCPF'6*<WTKEJ
Mobility and the exchange of ideas are the crucial benefits of cities Thomas Rühl joined Credit Suisse in 2005 as an economist responsible
and key to the competition for attracting businesses. Cities that HQT5YKUUGEQPQOKECPCN[UKU.GCFKPIVJG5YKUU4GIKQPCN4GUGCTEJ
tackle the “urban crawl” will thrive. Those unable to adapt their mobil- and tax competition, he has been a consultant for several Swiss can-

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


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.
INTERVIEW by Richard Hall

Richard Hall: How did the So, it’s an alternative What other innovations
“Shareway 2030 ” project take shape ? American dream ? does Shareway propose ?
Eric Höweler: Some auto manu- Eric Höweler: In a way, it is. Eric Höweler: In addition to these
facturers are realizing that streetscapes Car ownership and the wider narrative mobility scenarios, we imagined a
are being transformed to deprioritize of freedom and social mobility are “Sharestay” time -share system for
the car and they want to understand certainly intertwined in the USA . houses where you only pay for the
the wider urban context better. So As architects, though, we tried to con- time you actually spend in a building.
Audi’s research team asked six archi- ceive of urban mobility in its widest And we experimented with urban
tecture firms to submit “visions” for sense. The Shareway encompasses agriculture schemes (“Farmshare”)
the future of urban mobility. We chose housing and suburbs, the train/plane/ and an innovative rotating road
to pitch a remake of the Boston-to- car/bike interface, “last-mile” surface (“Tripanel”) that would flip
Washington (BosWash) megaregion strategies, house sharing and urban between city street, park and energy
envisioned by Jean Gottmann in his agriculture. source. Shareway ultimately aims to
1961 book, “Megalopolis.” How would the transport replace isolated, unimodal commutes
What exactly is BosWash ? component of Shareway work ? and inefficient, dispersed infrastruc-
Eric Höweler: At the heart of Eric Höweler: The core consists tures in the BosWash region with
BosWash is the notion that many cities of a bundled transit system connecting a tightly meshed transport ecosystem
in the USA are no longer discrete public and individual transport to a orchestrated by smart software and
entities; one metropolitan area often single artery running along the social media. In this world, access –
spills over into the next. The megalop- 400 -mile stretch of Interstate 95 . switching and sharing – would matter
olis 1960 s futurists imagined for the The Shareway is a network of hubs more than ownership. Ɓ
year 2000 is now a reality. Within the and pathways (including a high-speed
BosWash region, which is now home train running above the I- 95 ) in
to over 53 million people and gener- which people and cargo would travel
ates one -third of the nation’s GDP , along a “stacked” route. Bundling
America developed a number of (sub-) allows passengers to switch between
urban prototypes – cul-de -sacs, strip the different transport modes and local
malls, drive -thrus – which have been and national transit. To help reduce air
exported all over the globe. These traffic in BosWash and accommodate
Eric Höweler is a registered architect,
experiments are no longer sustainable. larger planes and cargo ships, the architectural writer and co-founder of Höweler
So we tried to reimagine mobility Shareway would link the high-speed + Yoon Architecture LLP, an interdisciplinary
and collective consumption patterns transport network to a multilevel Assistant Professor at Harvard University’s
in such a megaregion in 2030 . “Superhub” in Newark. )TCFWCVG5EJQQNQH&GUKIPKP$QUVQP75#

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
DISPERSION is only six handshakes away from the
president of the United States. It occurred
to me that both problems involved networks,

How ideas and that interested me.

What makes the idea so powerful ?
Duncan Watts: We’re attracted to

spread 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
Every human advance, and what we call culture, relies on the enmeshed in social relations. Everything
we do and care about involves other
human capacity to embrace new ideas en masse. But how does that
people. These are network concepts.
happen? How does an idea become so compelling that it is worth Recently, you’ve been working on the
sharing? More important, how is it that ideas come to be adopted? structure of viral diffusion, for example,
Duncan Watts has made a career of studying how ideas spread. of tweets on Twitter. What’s that about ?
Duncan Watts: We’ve been mapping
INTERVIEW by Giselle Weiss
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,”
Giselle Weiss: Your early research is asso-
ciated with the wildly popular idea of six “Some things who very explicitly draws the analogy
between the spread of behaviors or beliefs
degrees of separation, which far predates
you. How did that idea spread ? do spread quite and diseases.
That sounds reasonable.
Duncan Watts: I don’t know. But the
notion that we are all connected through a lot … but they Duncan Watts: At a certain level,
it is. But it’s tempting to go a step further
a short chain of acquaintances has been
around for a long time. It shows up in are very rare, and apply the same mathematical models
that have been developed to understand
a 1929 short story called “Chains” by the
Hungarian poet Frigyes Karinthy. And one in a million the spread of a disease to the spread
of ideas or products.
the urbanist Jane Jacobs speculated about
it in her famous book, “The Death and events.” What’s wrong with that ?
Duncan Watts: There are all sorts
Life of Great American Cities.” of models of how things spread, and they’re
They didn’t call it six degrees often incompatible with each other. More-
of separation, though. over, we have very little data to test any
Duncan Watts: No. That label comes of these models. For example, if you want
from the title of a Broadway play of the to trace the spread of an idea, you have
1990 s by John Guare. The actual history is to be able to observe that person A has that
a little involved. But in any event, in 1967 idea, and then that person tells B, and then
psychologist Stanley Milgram set out to test person B has the idea, and now person B
the idea by having people in Boston deliver tells person C. Mapping this out in a popu-
letters to people (“targets”) in Omaha, lation of millions of people with hundreds of
Nebraska, through the intermediary of thousands and millions of things to observe
others known only on a first-name basis. is a tremendously difficult process.
He found that the average length of the So how do you approach it ?
letter chains that reached the targets was Duncan Watts: We’ve done a lot of work
six. He called it the small world problem. using Twitter data – news, media, images –

where we can, to some approximation,

observe everything. And we can also track “This is not 9JCVFQ[QWTƟPFKPIUVGNN[QW !
Duncan Watts: Unlike diseases, where
exactly where everything is at a given point.
People who study diffusion are generally about cat videos in general you only have one thing spreading
at a time, in ideas, it’s always a contest.
looking for a critical threshold where ideas
go from not spreading to spreading like going viral – Everything that’s spreading on 6YKVVGTKUƟIJV-
ing for oxygen with everything else that’s
And what have you found ? it’s about chang- spreading on Twitter. It’s hard to be exposed
to one particular idea because there’s just
Duncan Watts: Initially, we found that
nothing really spreads like that. In a study of ing people’s so much other stuff to pay attention to.
Occasionally something is able to rise above
millions of observations, 99% of everything
that happened, every “adoption” of an minds, and their the noise, and everybody hears about it and
pays attention to it. But that is extraordinari-
idea, was within one degree of the source.
Which is almost the opposite of spreading. behavior.” ly rare and somewhat arbitrary. If you’re a
social media strategist or a digital advertis-
In other words, I tweet something and ing agency, basing a marketing or other
you re-tweet it. Your followers see your strategy on triggering a social epidemic is
re -tweet, but they don’t do anything. probably not the best use of your resources.
It’s the re -tweet that we pay attention to. You are also investigating the nature of
When we described this result to our cooperation between people. How is that
colleagues, however, they often didn’t like it. related to the spread of ideas?
Why ? Duncan Watts: The spread of informa-
Duncan Watts: People are convinced tion and the spread of cooperation are both
that certain things “go viral,” and that’s what examples of social influence, so they’re
interests them. So they would say, “We related, at least in principle. But it’s also im-
know some things spread. Look at ‘Gang- portant to understand that different types of
nam Style’ or the use of Hotmail or Face- influence are likely to spread in different
book. Maybe you didn’t see anything ways. Me persuading you to change your
spread, but you must only have looked at political views is very different from me per-
things that weren’t any good.” So then we suading you to click on a video.
did a second study where we really looked How so ?
at everything on Twitter – a billion obser- Duncan Watts: People do not easily
vations – for an entire year. And sure enough, adopt ideas that involve changing their con-
we found that some things do spread ception of themselves. Not accepting the
quite a lot. But they are very rare, one in idea of climate change might be tied up
a million events. And even they don’t with your political ideology, your suspicion
look like “social epidemics.” of government and your dislike of elite
Why not ? Surely “Gangnam Style” intellectual types. When is an idea some-
is a social epidemic? thing that you can adopt just because it’s
Duncan Watts: Epidemic models obviously right or obviously interesting?
assume that ideas become popular by viral And when is it something that is going
word of mouth. But in the media world, VQDGXGT[FKHƟEWNVHQT[QWVQCFQRVDGECWUG
information can also spread because some it’s tied up with all these other things?
major channel or site picks it up – it gets What are the stakes?
on the front page of Yahoo! or the “New Duncan Watts: This is not about cat
York Times” or whatever – and a million peo- videos going viral, even if sometimes that’s
ple or a hundred million people see it. And what we study because it’s what we have
a bunch of them re -tweet it. That would still the most data about. Really, it’s about
be popular, but we wouldn’t say it had changing people’s minds, and their behav-
spread virally. So when something becomes ior; and one way or another, everyone –
popular, is it a “broadcast” or is it “viral”? governments, corporations, marketers, poli-
Intuitively, you might guess one or the cymakers – is in the business of trying to
other. But when we looked, we found tre - change people’s minds. Understanding how
mendous diversity: some popular things that happens is one of the big questions
are pure broadcasts, and some display 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
pure viral spreading. We also found about at Cornell University. From 2000 to 2007, he was been thinking about this for so long and
every conceivable mixture of the two. 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
There’s no typical way in which things Know the Answer): How Common Sense Fails Us”
swers. But maybe this particular period of
become popular. (Crown, 2011). JKUVQT[KUFKHHGTGPV6JCVoUVJGJQRG Ɓ

Comparison of Chinese travelers who travel

abroad for business and for leisure

for leisure
for business
and education

Comparison of Chinese travelers who travel independently and those

who travel as part of arranged groups, according to hoteliers

of guests
travel as part
of arranged

of guests travel

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

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 %

Friends Travel guides

60 % 15 % 11 % 55 %


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 highlights current trends.
TEXT Scott Booker, president,

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

The wish list The reality
 #7564#.+#  75#
 (4#0%'  *10)-10)
Scott Booker is President of, a leading online
 0'9<'#.#0&  6*#+.#0&
accommodation booking website that started as a telephone
2002. There are now more than 85 sites worldwide.  59+6<'4.#0&  5+0)#214' 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:
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;
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-
tionally. Nonetheless, cultural attractions such as the theater, concerts,  )'4/#0;   
comedy shows are slightly more appealing to this group.  75#   
Knowing the customer
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   
choose language -related items, such as translated literature, website,
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
 %#0#&#  #7564#.+#
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:


Mixing business
and pleasure
Hotel des Bergues in 2005, it now caters to the global business and diplomatic community.
INTERVIEW by Giselle Weiss

Giselle Weiss: What is the single José Silva: … they will change the drastically changed the world. Instant
biggest change you’ve observed in nature of the hotel industry. Like value -for-money comparisons can
the hotel industry in recent times ? Americans changed the nature of the be done at the tip of a finger. As a
José Silva: We are historically a hotel industry. You can get eggs hotelier, you can’t avoid it. And if you
business hotel. Today, people combine and bacon for breakfast now anywhere are good at what you do, the in-
work and pleasure. It’s no longer around the world. creased transparency pays off because
just a matter of going to the gym. What are today’s guests looking for ? success is rewarded so much faster
Sightseeing used to be something José Silva: Personalization. It used than in the past, and sometimes
leisure guests did. Now you have to be that what people wanted was overnight.
a business partner booking an hour choice. So you’d offer a big breakfast How would you sum up the
at a museum between meetings, buffet. Now people expect you to significance of mobility for the travel
or going for a bike ride. know their preferences, whether and tourism industry ?
What explains the change ? that’s family activities or DVD s. Our José Silva: Some people still see
José Silva: Technology has hotel has 115 rooms, and each room traveling as a nice but expensive
transformed people’s business lives. is assigned one of our six personal thing to do. In fact, compared with
It is so in our face ! We are always on assistants who do nothing but other human activities, traveling is not
the phone, or dealing with e -mail or personalize the preferences of every so expensive. It has become part
checking company websites. Conse- guest. That kind of service requires of entertainment and culture, and it’s
quently, work and play have merged. careful observation. here to stay. Traveling has become
Which nationalities stay at the hotel ? A 2011 report by the IBM Institute for a way of life, a basic need. Ɓ
José Silva: Geneva’s a bit different Business Value, titled “The Personal-
from other areas of Switzerland. ization Paradox,” cites the power
So while we do see an uptick in clients of social media as a source of informa-
from emerging markets, at present tion about guests’ unique preferences,
our base is still primarily Europeans but also the challenges it poses.
and North Americans, unlike Interlaken José Silva: People want personal-
or St. Moritz, which are more special- ization, and value the effort we take
ized. We have 500 international to know about them. But we are very
organizations here, which contributes careful to use only information clients ,QUÅ5KNXCKU)GPGTCN/CPCIGTCVVJG
Four Seasons Hotel des Bergues Geneva.
to a more global clientele. have told us or made public elsewhere. He previously worked for Four Seasons
And yet India and China each Is TripAdvisor complicating your life ? KP/QPVTGCN%CPCFCKPKVKCNN[KPVJGHQQF
and beverages division, and later opened
have over a billion people. When José Silva: TripAdvisor and a Four Seasons in Lisbon, Portugal,
they start to travel more … distribution channels have obviously before making the move to Switzerland.
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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,
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- ance sector and US banks. Javier has 18 years
Design and realization of experience as a buy- and sell-side analyst. He holds a Master in Economics from the Uni-
Angélique Bolter, Claudia Veit, Maja Davé,
versity of Bern.
Sacha Steiner, Rahel Frick (project management) > Page 26 –29
Editorial support Andrea Schnell
Giselle Weiss, Dorothée Enskog, Richard Hall, Robin Scott Research Analyst
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 YGNNCUKPƟPCPEKCNKPUVKVWVGUKPENWFKPIVJG
Intranet access for employees of Credit Suisse Group:
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
systems, tax competition, regional business
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 –
© myclimate – The Climate Protection Partnership > Page 46 – 48
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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

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