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Continued from previous page
Weighing Risks and Rewards in Emerging Markets
As companies chase global talent pools and technology reduces
the constraints of geography and time,
outsourcing of labor will continue as a key strategy, tipping the
shift in economic power to China,
India, and other labor markets.
“Outsourcing does not equal globalization,” cautioned
Morris Cohen, Wharton’s Panasonic Professor of
Manufacturing and Logistics, at the panel on “Globalization
and Outsourcing: Integration with India and China.” He noted
that outsourcing is more of a valued-added option for organizations
to meet competition and the need to coordinate
global activity. Cohen said that outsourcing minimizes costs as
well as cuts across the mosaic of the global supply chain.
Sashi P. Reddi, GrW’94, Founder, Chairman & CEO,
AppLabs Technologies, stressed this in the advantages of doing
business in India. Specifically, labor is cheap and labor
laws in India are flexible, taxes are low and can be waived
based on the location in India, and there is a good network of
revenue flow.
Said Reddi, “India has three ways to say yes, and no way to
say no.”
Rohit Aggarwal, W’94, Co-Founder and Managing
Director, RAS Capital Management, weighed in on the
Indian economy from a different perspective on the
“Emerging Markets” panel. The country’s recent average
GDP growth has been 9%, and its purchasing power is the
size of the Chinese economy. While India is behind China in
infrastructure, Aggarwal returned to Milken’s theme to state
that India’s greatest asset is human capital,
with a large population of educated
English-speakers and 50% of
population under the age of 25. The
Indian economy is supported by its
own domestic consumption and the
large middle class, leading to the explosion
of consumer demand.
Panel moderator N. Bulent Gultekin,
Associate Professor of Finance, explained
that emerging markets provide
foreign investors with outlets for expansion,
but as employment levels rise in the region, labor costs increase.
He cited Ireland and Spain as two economies that have
succeeded through changes in the social pact, deregulation,
tax reduction, investment in education, and political stability,
while former Soviet bloc nations such as Poland and the
Czech Republic have had a slower pace of change from their
socialist economies.
“It’s difficult to find the perfect country,” he said. He advised
investors to select countries, know them well, stick with
a commitment once made, invest only what they can afford,
and monitor investments closely and continually.
Emilio Bassini addressed the topic of Latin America, explaining
that he wanted to focus on the part of the world
he knew best. He cautioned that investors must price returns
properly to take in to account the full risks, but asserted,
“It’s a very good time to be in Latin America. If you
look at the number of IPOs in the Brazilian market this
year, it’s staggering. The IPOs have been well priced, and
the money was being raised for the right reasons. There have
been fewer IPOs elsewhere in Latin America but still quite a
bit of entrepreneurial activity. Performance comes from the
flow of funds through public pension plans. The power of
foreign institutional dollars is very big. When lots of money
goes in, stocks do well. IPOs in Brazil may slow deepening
of markets.” |
