The new rules of a globalised world

Global changes that have taken place since the 1990s demand a thorough re-evaluation of all affected areas of the economy, to make the most of the positives and avoid the negatives.

At a time when many of these changes are still hazy and unclear, many arrive at a hasty conclusion and see everything things in terms of black and white.

For example, if we look at the current huge acquisition trend, which is unmatched throughout economic history, we will find that globalisation, communication, liberating trade and capital movement have pushed this trend to new horizons never imagined before.

For more than five decades and since the end of the Second World War, developed countries have been urging developing countries to remove restrictions imposed on foreign trade and open up their markets, including capital sectors, for foreign investments.

This resulted in acquisitions of vital economic sectors because of their financial capabilities and administrative and technologic experience.

Through the last five decades, most developing regions remained poor, while rich countries, especially oil nations, were busy building their infrastructure, which is vital for development.

This was at a time that oil revenues were not high due to relatively low oil prices.

Oil rich countries, especially in those in the GCC, successfully completed building their infrastructure, which was accompanied with increasing oil revenues and the availability of cash that allowed these countries exceptional investment abilities. Industrial countries also saw big technologic and economic leaps.

They have also been subject to fierce competition from emerging countries such as China, India, East Asian countries and oil exporting countries in the Arabian Gulf.

During the past three years, these countries made big acquisitions of economic and financial institutions in Europe and the US, which opposed such acquisitions under the pretext of protecting national interests.

Such excuses were not used only by the US, but have lately been used by Holland, Sweden, the UK and other European countries.

This was the exact opposite to what was earlier demanded of developing countries. While they were taking steps to liberate their markets, industrial countries were acting to prevent developing countries from taking over more of their well-established institutions.

These procedures came after GCC countries took over companies and assets worth $70 billion in 2007, and with expectations that India will contribute to international mergers and acquisitions worth $55 billion by the end of this year.

The acquisitions include many active economic activities in industrial countries, including companies working in the financial, investment, industrial, telecommunication, transportation, infrastructure and retail fields.

Limitations

The figures could have been much higher if it was not for these limitations and objections, and are expected to increase for many reasons, among which is the increase of cash flow in OPEC countries, including GCC countries.

Surplus on current accounts in OPEC countries is expected to reach $500 billion this year, compared to $400 billion last year and only $100 billion in 2002.

There are also many western companies that consider buying and acquisitions an opportunity to improve profits and develop their productivity and competitiveness.

Globalisation opened the doors for competition and acquisition, and everyone, including industrial countries, must accept the results of the globalisation stage, or change the rules of international markets.

The writer is a UAE economic expert.