I returned from another interesting week in Brazil and with each visit I find that I get a better glimpse of the dynamic changes happening in this market. This was my second visit in the past six months, and given the deep and ongoing interest by manufacturing companies, it certainly seems to be a place that deserves increasing attention.
During this most recent trip, I had the opportunity to meet with several senior executives at top Brazilian and multinational companies. It was fascinating to receive firsthand accounts from these manufacturing leaders on both the strengths and challenges of the current business environment in Brazil and their outlook on prospects for the future. Not surprisingly, despite the diverse manufacturing sectors these leaders represented, their insights had very common themes.
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Asset management is in a state of flux. Trillions of dollars are expected to change hands over the next number of years as baby boomers begin to transfer their wealth to the next generation – a generation that has grown up in a culture that calls on business to play a more active role in building a better society. In this context, the field of “impact investing” has taken center stage as a means to enable and empower for-profit business models to address society’s toughest challenges.
But what exactly is impact investing, and isn’t all investing intended to create impact? First coined by the Monitor Group in 2009, impact investing is an emerging industry that places capital in businesses (or entrepreneurs) that intentionally seek to create social or environmental value. This could be an investment in a dairy products producer in Nairobi that works to increase the efficiency and production levels of small-scale farmers in rural Kenya. Or, it could be an investment in an innovative program that seeks to reduce youth recidivism (repeat criminal offense) in New York City. The common thread among impact investments is the notion of intent – when the investor intentionally seeks to create social or environmental value, the investment is an impact investment.
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Executives often ask me about the manufacturing landscape in India. Based on my observations during a recent visit to India and my ongoing discussions with our clients, India is a vibrant market which continues to attract investment interest. This trend indeed is echoed in the 2013 Global Manufacturing Competitiveness Index report released by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group. The global industry survey had over 550 respondents, who were chief executive officers (CEOs) and senior leaders at manufacturing companies around the world. These executives ranked India as the fourth most competitive nation today and believe that the country will rise up in the rankings to be the second most competitive manufacturing nation in five years. As you can imagine, there were many executives and government officials in India who were very interested to hear more about the study, so my trip back to India last month was very timely.
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The unprecedented scale of the reform to achieve consistent profit reporting across the global insurance sector is now fully visible. Preparing for the multi-year implementation effort is an imperative for all insurance companies immediately after their 2012 earnings release next year.
A substantial leap forward
During November the International Accounting Standard Board (IASB) has made a substantial leap forward in removing the uncertainty that surrounded, for the past several months, the timing and content of the fundamental reform of financial reporting rules for insurance companies.
The repercussion of these new decisions is about to produce a significant impact across the global insurance sector, since insurers’ major concern around uncertainty has been addressed. Some of the global software houses have already invested thousands of man-days in the development of solutions to address this challenge and ‘first-movers’ are already developing an approach to the implementation challenges.
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During a recent trip to Tokyo, I met with 40 leaders from Deloitte member firms across the Asia Pacific region to discuss what is happening in this dynamic market. As you might imagine, China and India dominated the conversation, but several other countries in the region, often referred to as the next frontier growth markets, were very much part of the discussion.
With the expected government leadership changes this month and signals that manufacturing activity is declining, executives are closely watching what is happening in China. Last month, a 7.4 percent year-on-year rise in China's gross domestic product (GDP) in the third quarter was announced. Some believe however that those government statistics may be more optimistic than the reality experienced by many manufacturers in China. This is the weakest announced growth rate since the start of 2009 and the seventh straight quarter of decline. Many executives are cautiously waiting to see what the new Chinese leadership will do to spur accelerated economic growth and improve manufacturing industry activity.
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I had the privilege of speaking a few weeks back at the Australian Industry Group National Forum, the premier industry event which is held annually at Parliament House in Canberra, Australia. More than 350 CEOs, senior executives, and government officials listened to an array of local and international speakers address some of the major issues and big ideas on Australia’s national agenda together with strategies to improve the industry competitiveness. It was quite an honor to be invited to participate in this session.
During my presentation, which was featured in ABC TV’s The Business program (see video clip) I shared perspectives of how innovation is at the heart of what some are calling a “Manufacturing Renaissance” or an industry revival. Often overlooked as a place for innovation, manufacturing continues to be on the leading edge of innovation. You just have to look at the bold innovation plays that are happening today in areas such as advanced materials systems, additive manufacturing, and sustainable mobility.
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The future of renewable energy has been cast into doubt this past year. Natural gas prices have dropped significantly due to new technology that enables formerly uneconomic resources to be reached, creating a lower price bar that renewable energy must meet. The global financial situation has caused many jurisdictions to reduce or eliminate subsidies for renewable power, which has slowed the expansion of projects. Combined with opposition in many regions to the construction of wind turbines, one could wonder if the enthusiasm for renewable energy was an unsustainable short-term phenomenon.
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With the 2012 Olympics just around the corner, I cannot imagine a better venue to host a discussion on competitiveness than in London. The city provided an ideal backdrop for a recent Deloitte industry event which underscored the talent issues faced by many global manufacturers and the importance for companies to continuously reinvest for growth to remain competitive.
The Deloitte Manufacturing Competitiveness Summit event featured a distinguished panel of senior executives from three prominent manufacturers, ArcelorMittal, Siemens, and Jaguar Land Rover, as well as a senior representative from the European Commission.
The panel shared views on how they were working to ensure their companies remain globally competitive. It was fascinating to hear one of the executives say that 100,000 apprentices will be needed in the United Kingdom (UK) manufacturing industry alone in order to replace the retiring baby boomer generation in that company. Another executive reinforced the talent issue by outlining the skill shortage in fields like engineering and production supervision saying it was particularly challenging in their business to find these experienced hires.
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Two weeks ago, I traveled to Johannesburg for my first ever trip to South Africa. It really expanded my perspectives to the many opportunities and challenges that lie ahead in both South Africa and the broader continent of Africa. It is easy to see why many companies have an eye on Africa.
While I was only in the country for four days, they were certainly full ones. I was able to lead several client workshops, participate in a forward-looking discussion on the future of the manufacturing industry in Africa, and join a media interview.
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We’ve all seen the headlines: Canadian government reports unprecedented deficit; U.S. elected officials clash over debt ceiling; Greece teeters on the edge of default. They all point to the monumental fiscal struggle most countries are engaging in these days. But, what if there was a way to put billions of dollars back into government coffers—money that is technically their due? That’s exactly what could happen if countries step up their efforts to address the tax gap.
Simply put, the tax gap is the difference between the tax collected and the theoretical tax liability if every taxpayer complied with the letter and spirit of the law. Take the United Kingdom. It’s been estimated that in 2010 the tax gap was US$56 billion. In Sweden in 2010 it was estimated at US$20 billion. And in the United States in 2006, it was estimated at US$385 billion. (Sources: HMRC (UK), Swedish Tax Agency, Internal Revenue Service (US))
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