For geoeconomics power play, settle these two issues

Every country wishes to be on the right side of the history and at the same time be able to play geoeconomics in its favour. For that there are two vital issues to be settled. Here we go:

Firstly, a nation must decide whether any proposed development is to be financed by raising debt or soliciting investment from abroad. To be eligible to raise debt credentials including country credit rating must range between good to excellent. In the case of credential it is all about past history of repayments whereas to get a good to excellent credit rating the current economic growth along with political stability are assessed.

Investment is a different ball game because investors are not looking for present condition but the situation that would prevail tomorrow, next month, next year and so on. For example, Singapore attracts huge quantum of investment for her economic development mainly because of her long-term survival as an industrial, commercial and trading nation.

Second issue relates to the choice between export promotion and import substitution. The former is on the high side of the risk profile due to competition by advanced geoeconomics power centres where butting against them might be suicidal. Here a degree of calibration is required. What China did originally when Deng Xiaoping opened up the economy is to initiate processing of low-tech manufacturing items as he said, “Keep a cool head and maintain a low profile. Never take the lead - but aim to do something big later”. China obediently followed suit and today she is the number one geoeconomics power.

Import substitution on the other hand does not require a long waiting game. It can be started at any time whenever a nation decides to follow through. The crux of the matter is, there is ready market that is already served by the imported goods within a country. Put it the other way, the demand is there what is needed is changing the supply line from imports to domestic production. Indonesia for example saw this coming much before other ASEAN members ever did. She has huge population at 275 million people that is correlated with growing demand for consumer products.

Consumer spending in Indonesia is estimated as USD 730 Billion per annum. It is revealed by IPSOS Global Trends Survey that 87% of Indonesian consumers are more likely to choose local products than global ones. Plainly put, that is a whale of a lot of money for import substitution.

Succinctly stated, the two issues debt or investment as a means of economic progress along with export promotion or imports substitution as a method of production play vital roles in the pursuit of geoeconomics power for emerging nations!

  

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist