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Economy

State Capitalism: Fortune 500 and Chinese Companies

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Authors: Tridivesh Singh Maini and Mahitha Lingala*

Fortune Magazine’s Global 500 list is noteworthy. For the first time, the number of Chinese companies in the list (119) nearly equals that of the US (121). If one were to add companies from Taiwan (10), the number of Chinese companies (129) comfortably surpasses that of China.

 It would be pertinent to point out however, that the revenue of Chinese companies counts for a little over 25% (25.6%) of the 500 companies as opposed to that of the US which accounts for 28.8%.

 In the top 5, there are three Chinese companies (all state owned); Sinopec group (ranked number 2),  China National Petroleum (ranked number 4) and State Grid ranked number 5). The percentage of State Owned Enterprises in the list has risen from last year (over 80% in 2019 from 76.3% last year).

A number of Chinese banks like the Industrial and Commercial bank of China, followed by China Construction Bank, Agricultural Bank of China were also on the list.

 This list, once again reiterates the point, that China’s growth has been largely propelled by a model of ‘State Capitalism’, where state run enterprises have helped China increase its clout globally.

In recent years however, a large number of private enterprises have also emerged like Ali Baba, Huawei, Xiaomi, Oppo, Dashang Group, Ping An and legend holdings have emerged.

 Ping An which is a tech giant as well which feeds its data algorithms with data harvested from its close to 200 million customers stood at the 29th place on the list with an annual revenue of $163.5 Billion.Huawei telecom jumped 11 spots from last year and was at 61st place,with revenue estimated at$ 109.03 Billion.Ali Baba witnessed fastest growth jumping 118 spots and was ranked at 182.

State Capitalism vs the model of liberal democracies

State Capitalism has been one of China’s major successes, because the Chinese government has no ambiguity in backing mega projects of its enterprises overseas like Twyford factory in the Kenyan Capital, Sunshine group’s mining activities in Tanzania, and many more infrastructural projects in the African Continent and other parts of the world. One of the most important investments is that of the Chinese Export-Import Bank provided 85 percent of the funding for the $475 million Addis Ababa Light Rail.

It would be important to point out, that even private companies, a prominent example being Huawei, are not free from Chinese interference. Australia has banned Huawei from rolling out 5G network. Trump who has dubbed Huawei as a national security threat had imposed a ‘government blacklist’. Recently, while trying to relax some of the restrictions, the US did state that Huawei was still on the entity list and would need a US government license to buy American technology.

Economic growth in democracies on the other hand is not solely dependent upon state enterprises. The number 1 company on the Fortune 500 list is Walmart. If one were to look at the case of Indian companies which are there on the list, there are two private sector companies while the rest are PSU’s. While Reliance is ranked at 99. Oil & Natural Gas Corp (ONGC) a PSU ranks 160, State Bank of India (SBI), Tata Motors, Bharat Petroleum Corp Ltd (BPCL) ranked 275 and Rajesh Exports a private sector company is ranked at 495.

How Chinese companies are benefitting from BRI

A number of Chinese companies (a prominent example being shipping giant COSCO) are seeking to benefit through the Belt and Road Initiative (BRI) .

Beijing has injected massive amounts of capital into Chinese public financial institutions, which make borrowing costs very low as their bonds are treated like Chinese government debt, allowing them to lend cheaply to Chinese companies working on BRI projects. This enables the Chinese companies to outbid their counterparts to due to the inexpensive availability of funds. China’s state owned enterprises that suffered a drought for a while, due to the slowing of the domestic market, are getting a push due to BRI as they are now investing in over-sees infrastructural projects. Most of the BRI initiatives have thus far been implemented by Chinese Companies. Right now, 89% of BRI projects have been implemented by Chinese companies, with the main beneficiaries being construction and infrastructure sector companies.

Another Chinese Industry to gain from BRI, is the tech export industry. For example , Haier Electronics which is a Chinese appliance manufacturer has built six industrial parks in BRI countries.

Projects that initially started as merely China funded projects, they were later on leased or taken over by Chinese Companies, one such project is the Hambantota port. The port was built with 85% funding from the EXIM Bank of China, but in 2016, 80% of it was leased to a Chinese company called China Merchants Ports holding company (CMPort) for debt for equity swap.

Indo-Pacific and private sector

While US, Japan, India and Australia have been speaking about an alternative vision to the BRI , through the FOIP (Free and Open Indo Pacific). One of the distinguishing factors of the FOIP can be greater participation by Private players from these countries in connectivity and infrastructure projects.

The Trump administration has been supporting a greater role for the private sector in FOIP related connectivity initiatives.

Commenting on US involvement in the Indo-Pacific, US Secretary of State Mike Pompeo had stated:‘….. We want these to be commercially available projects led by the American private sector in a way that benefits the entire region and the world,”

The US Secretary of State during an address at the US Chamber of Commerce while outlining the US vision for the Indo-Pacific (which included 113 Million USD for areas such as Digital Economy, Energy and Infrastructure  as well as ) while highlighting the important role of the private sector in the Indo-Pacific stated that US private companies.

The BUILD (Better Utilization of Investment leading to Development) act which received bipartisan support in the US Senate as well as House of Representatives, has helped in creating a new agency the U.S. International Development Finance Corporation (USIDFC) to replace the earlier Overseas Private Investment Corporation (Corporation) which encouraged private companies to invest in Africa. USIDFC is different in a number of ways first its budget is 60 Billion USD as opposed to the earlier 29 Billion allocated for OPIC. Second, it can make deals and provide loans in local currency which makes it more attractive.

Conclusion

The Fortune 500 list brings to the fore many points, one of them being that liberal democracies such as US, Japan, Australia and India, need to come up with an alternative model to that of China’s State Capitalism. While the FOIP has lacked clarity, one area where it can improve is to come up with clear aims and objectives beyond countering China (the BUILD act is a positive step in this direction). This will also help counter ambiguity surrounding the versions of Japan and US’s FOIP versions. A first step could be roping in private players from US, Japan, India and Australia into infrastructural and connectivity projects and not merely depending on governments.

*Mahitha Lingala is a student at The Jindal School of International Affairs, OP Jindal Global University, Sonipat, India

Tridivesh Singh Maini is a New Delhi based Policy Analyst associated with The Jindal School of International Affairs, OP Jindal Global University, Sonipat, India

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Economy

Internship tips from an intern who became an owner and CEO

MD Staff

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Photo courtesy of Tim Pannell / The Forbes Collection.

Internships can be a valuable opportunity to start your full-time working career, and change your life.

Fatih Ozmen went from intern to owner and CEO of multi-billion-dollar aerospace and national security leader, Sierra Nevada Corporation (SNC).

Starting at SNC as an intern almost 40 years ago when it was a tiny and struggling engineering company, Ozmen and his wife, Eren (now the company’s chairwoman and president), had the chance to acquire the company a few years later. Today, SNC is an agile, cutting-edge disruptor in government contracting with a workforce of 4,000 that supports and protects explorers and heroes. Ozmen has been SNC’s CEO and owner for a quarter century.

Of his journey from intern to CEO and owner, Ozmen said, “I credit a lot of good luck and some good choices, starting with how I approached my internship.” Here are his three tips to help you get the most from yours:

1. Look for companies with missions and values that inspire you.

“As a student or intern you can feel independent, like you’re holding your future in your hands. A lot of business people will tell you to consider an internship a transaction to meet your needs. I would encourage you to turn that focus outward.

“Ultimately, once your basic needs are met, it’s the deeper rewards that keep us going. Things like the feeling of being part of a team and making a real impact. I’d encourage young people first to identify companies or teams that are addressing challenges that really interest you. Read the bios of the people you’d work with or for. Do their stories, and the company’s story, inspire you? Are people there working in their individual interest or in the interest of the team, and the overarching mission?

“It’s more rewarding when you see a whole group within the company working toward a larger goal. Let me give you an example. On a number of occasions, people have come up to Eren and me to tell us how we saved their lives in the battlefield. There was one time our holiday party was crashed by people who wanted to meet the SNC people who built our technology that jams cell signals and prevents IEDs from exploding, protecting our servicemen and women. These people thanked us and cried, and we cried with them. They shared heartfelt stories about how our technologies enabled loved ones to come home safely. This is priceless.”

2. Always look for an opportunity to understand the core need, to look beyond the “what” and truly understand the “why.”

“As a young engineer, working to enhance jet landing systems so they work in all conditions, including rain, was the biggest privilege for me.

“One of my first experiences early on was being on an aircraft carrier at 2 a.m. Standing next to F-18s and working among sailors day and night was fascinating and inspiring. I was sleeping right below the deck and hearing the roar of the aircraft engines, and tires skidding upon landing. They operate 24 hours a day.

“It was invaluable to see firsthand the problems pilots were facing and the environments sailors had to work within. It was eye-opening to see that while we are often comfortable in our homes and warm beds, servicemen and women are deployed months at a time away from their families working within dangerous conditions with poor visibility. Imagine being an F-18 pilot, finding the ship — a postage stamp-sized object off in the distance — and landing on it. That would be difficult to do in even ideal weather and visibility conditions.

“Our engineering task was straightforward: fix a strange flaw on the existing landing system that didn’t work as expected when it rained. We made it work and it’s amazing that 30 years later the Navy still uses the technology we created. Importantly, I was able to witness the challenge and solution, to work alongside the sailors and see it from the pilots’ perspective. This helped me to go beyond the what of our mission — a flaw in technology — to really understand the why — to save lives.”

3. Embrace newness and change as a journey, not an obstacle.

“When Eren and I first came to the U.S., we were young, didn’t speak much English and didn’t have money. But we did have goals and an unrelenting passion to chase our dreams. Was it easy? No. And I’d be lying if I said there weren’t days when it seemed impossible or challenges that we faced along the way seemed insurmountable. But this is our American dream. None of it would have been possible if we didn’t look beyond the uncertainty and challenges. It’s a great country that made it happen. I couldn’t do it anyplace else in the world.

”We live in a world where the American dream is in reach for everyone. Don’t take it for granted.”

With the power of dreams, innovation and inspiration, there is no limit to what you can accomplish once you get your start, Ozmen says. Learn more about internship opportunities at www.sncorp.com/careers/students/.

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Economy

Scaling up support for sustainable development: Mongolia on the rise

Armida Salsiah Alisjahbana

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Mongolia’s economic rebound in recent years reveals a country rising up to the challenges borne from adverse economic shocks. The country’s economic resilience comes as no surprise. Mongolia has responded well to near-term economic challenges and chartered its long-term path towards sustainable development despite its inherent constraints as a small and landlocked economy that is also highly dependent on natural resources. Mongolia prides itself as being one of the first countries to adopt the Sustainable Development Goals (SDGs), with Mongolia’s Sustainable Development Vision 2030 receiving parliament approval in 2016 just six months after the adoption of the SDGs globally.

In particular, Mongolia’s policy experiences in areas of economic diversification, good governance and regional cooperation were well-exemplified by the Action Program of the Government of Mongolia for 2016-2020. So, Mongolia has utilized these policy tools to carve for itself strategic positions to weigh in on issues significant to the country’s national development outcomes. For example, Mongolia leads the global agenda of the needs and challenges faced by landlocked developing countries (LLDCs). The presence of the International Think Tank for LLDCs in Ulaanbaatar further highlights the key role of Mongolia as a credible broker of the LLDCs development agenda.

Mongolia has been active in implementing intergovernmental initiatives facilitated by UN ESCAP including the distinct but interrelated intergovernmental agreements on the Asian Highway Network, the Trans-Asian Railway Network, and Dry Ports. We welcome the recent development on the entry into force of the Intergovernmental Agreement on International Road Transport along the Asian Highway Network among China, Mongolia and the Russian Federation, supporting trilateral economic cooperation.

Currently, Mongolia has substantively engaged on trade facilitation initiatives including the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific. There is great potential for Mongolia to strengthen its role in the related area of transport facilitation, given its position as a transit point between big economies like China and the Russian Federation. Also, we are pleased that Mongolia is soon to become the seventh member of the Asia-Pacific Trade Agreement, a preferential regional trade agreement, open to all developing member States in Asia and the Pacific.

Mongolia has also been a key driving force to advance cooperation for clean energy, especially towards a North-East Asia power interconnection, leveraging from the country’s abundant renewable (solar and wind) energy resources. Energy cooperation finds strong resonance in relation to climate action and air pollution, given the North-East Asia subregion emits over one-third of global greenhouse gases and faces heavy impacts of air pollution.

With inherent constraints due to its fragile economic structure and environmental condition, Mongolia constantly needs to find balance between providing prompt policy responses in the face of volatile and unpredictable external shocks in the short-run and pursuing structural changes to address long-term socioeconomic issues. Under these circumstances, pursuing an integrated approach becomes an imperative for Mongolia to advance its national socioeconomic agenda, regional connectivity agenda and global sustainable development agenda, bolstering Mongolia’s resilience towards adverse economic, social and environmental shocks. To this end, I welcome Mongolia’s emphasis on the “whole of government” plus a “whole of society” approach.

Through the years, we have seen how Mongolia continues to be a steadfast partner of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in promoting regional trade, connectivity and development across its various interrelated dimensions. Mongolia has also provided leadership in advancing regional cooperation agenda in the Asia-Pacific region by chairing the seventy-fifth session of UN ESCAP in May 2019.

Equipped with lessons learned from past development challenges and mindful of new directions and approaches to nurture future opportunities, Mongolia’s regional position and potential are on the rise. I am looking forward to partnering with Mongolia’s leadership to strengthen regional cooperation and achieve sustainable development by 2030 with the United Nations family.

Originally published in Montsame-Mongolia

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Economy

The Election Agenda

Naseem Javed

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Akin to the last Big Collapse, currently, the gatekeepers of the world economy are in deep silence as the new date of the next global financial collapse is being figured out. The Brexit, the EU, any new pending war, the US Elections or some new unknown issues are all single push buttons for a global crisis. However, some smart nations are awakening; the silent majority is slowly talking, and here assisting them expediently are the attempts on the global-age skills and lifelong learning to enable them to build their own respectable future. The other options for the world are to simply wait for an unfathomable chaos while listening to the restless citizenry. It’s time to vote, it’s time for asking the difficult questions.

Why Stop Trade-Wars Start Skills Wars?

Trade-wars are proof of poor quality exportability, poor skills and poor policies, but skills-wars are about creating highly skilled citizenry creating superior edge of exportability and blossoming local grassroots prosperity. Nations should avoid blaming, screaming and declaring trade-wars on other countries and rather first look inside and declare internal skills-wars on their own working-citizenry to improve their performance and capability to stand up to global age trading challenges. In the race of exportability performance, no nation can escape internal skills-wars, to face the challenges of creating local grassroots prosperity no national leadership can escape the ballot boxes, its simple win with skilled citizens and change the tune to build own nation. So, what are the new challenges and what’s holding back?

Why Discover The Art of Incompetency?

In a hyper-accelerated supercharged world, understanding and measuring incompetency of working masses is a brand new art; identification of this critical void with right contents to fix the crisis of exportability is a new science, the mobilization of working-citizenry to regain new skills is courageous deployment and bold national debates to openly face these challenges is global-age example of successful political leadership. This reality is also about those hidden but well-trodden crossroads; where universities of the world failed the students, ask millions of indebted MBAs, this is where government bureaucracies failed the citizenry, ask billions of SME taxpayers, and this is where conflict-centric agenda stripped naked the global populace of any intelligent dialogue and this is also where divisive politics and populist thinking are finding fertile grounds. Every minute of the day, around the clock, on the main-streets of the world streaming live to billions such failed procedures and outdated incompetency laced business processes or political rhetoric are now openly visible, what the working citizenry needs are revival of new global-age skills before turning them into restless mobs.

During ‘ The Print-Society’ of early last century, when printed word was power and when only the literate had access to knowledge while any meaningful transformation took decades, today the literate and illiterate of the world combined in billions, with earth shattering communication devices in their hands are advancing and asking questions. The global mindshare is now the world’s most powerful battlefield. Therefore, today, the internal wars to tackle incompetency of citizenry are far more important issues than any other types of outside wars. Such declarations of internal wars are positive starts backed with world-class thought leadership, regimented and disciplined national agenda to transform citizenry with global-age-skills for the new world of global commerce.

Systematically abandoned, the small-midsize-enterprises of the world, the elimination of lifelong learning to keep pace with technology and future job-securities of the working masses of the world only resulted in insecurity, fear and lack of confidence and finally brought the rejection of globalization.

The global exportability performance is more about global-age-skilled-nations with distinct superiority of entrepreneurial performance over seek-and-destroy-soldiered-nations. Today, laborious and routine-works are being replaced by smart-work; smart-work is being replaced by smarter-machines. The Masters of Robots will be the smart unlearners, while the Slaves of Robots will be the deniers of change. In global search for collaborative synthesizim, Expothon Worldwide is seeking alliances to downstream high quality debates and discussion with top leadership within a nation and inviting experts in various business growth fields to join the platform already aligned with this global exportability driven metamorphosis. The recent move last month by Worldbank to adopt this very format with their launch of Econothon a global project is also a very good step forward. Expect some major and positive events in this arena to bring global thinking forward.

The world is undergoing mega changes.
Nations are already flooded with massive innovations but lack massive commercialization. They have an overabundance certifications and degrees but seriously lack entrepreneurial direction. Nations have empty incubators and exhausted accelerators looking for real estate tenants. Nations have economic development programs but often without reality punch. Nations have trade groups like Chambers and Trade associations bodies that are stuck in the last century’s models and are collapsing in this new global age. Nations have unlimited resources and technologies but lack execution and understanding. It’s all there, but trapped in old cycles and old methodologies.

Why Answering Global-Age Demands?

At the dawn of E-commerce; switching from industrialization to computerization were not new-funding dependent issues; it demanded clear understanding and memorization of what was once called ‘hardware’ and what was ‘software’ the rest was all about on job-learning to adopt and swim in deep new technologies…most were almost free. We are at the same junction today and in desperate need to mobilize hidden entrepreneurial talents of the citizenry and bring them closer to existing SME base.

Three steps to advance on grassroots prosperity

1-Identify 1000 to 10,000 or 1,000,000 small and midsize entrepreneurs within a nation, and create a national agenda to quadruple their performance on innovative excellence and exportability. Caution; this is not to be confused with old out-dated-dysfunctional-government-data rather assembly of ultra-modern-digital and current-profiles of midsize enterprises within a nation. These are advance level mobilization and deployments laced with Artificial Intelligence, Virtual Reality, Augmented Reality and Block Chain and freely available technologies to smart enterprises and agile nations of the world.

2-Deploy massive digitization of top national trade associations and chambers of commerce to upgrade to world-class digital platforms so that their entire membership can skate nationally and globally showcasing their goods and services. Caution; this is not to be confused with already broken and disconnected websites from last decade, this is more like LinkedIn format colorful and highly interactive platforms

3-Engage the national entrepreneurial talent, 1000-10,000- or 1,000,000 small and midsize businesses in ongoing discussions and high quality entrepreneurial debates and create global bounce. Caution; this is not to be confused with a single plastic award night, this is about the remaining 364 days of the year filled with active and daily engagements.

Why the critical lack of knowledge?

Fact: The world can easily absorb unlimited exportable ideas in unlimited vertical markets.
Fact: The well-designed innovative ideas are worthy of such quadrupled volumes.
Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks.
Fact: The new global age skills, knowledge and execution are now the missing links


Some 10,000 Chambers of Commerce of the world are sorting out trade wars and trade disputes but not the new global age demands of global marketplace for their own memberships while some 100,000 National Trade Associations of the world are mostly stuck in last century when it comes to advanced level digital platforms and are afraid about their future roles and return on investment on membership fees. They all will shine under new flags of creating new global bounce and prosperity.

Public Sectors of the world are mostly grossly under-optimized on their own hidden talents, seriously afraid of entrepreneurialism and without global-age skills or innovative ideas how to tame an elephant. They will become confident, highly optimized and fearless, and will contribute freely to new ideas and prosper.

The small and mid-size enterprises all over the new and old world, though in critical need of global age expertise, are already in boiling pot and do not have the time, finances or the luxury to intellectualize such issues. They have already lost faith in their local support but will rejuvenate with joy and become the number one source of new job creation within a nation.

Blaming other countries, the political gatekeepers of the world are mostly busy showing off their latest Teleprompters so will they get public attention, votes and most needed respect or they need brand bold direction. The overflow of free technologies, progressive local, national and global solutions are grossly misunderstood and least optimized areas. This is an ocean in need swimmers and scuba-divers. 

Why it’s time to re-think?

Most nations already have extraordinary wealth in hidden assets;
Natural resources; mostly unearthed, and underutilized.
Human resources; untapped and abandoned,
Cultural and historic features; caught in divisive conflicts
National intelligencia and knowledge; developed over millennia now isolated or outcast
All these tossed around under the dead weight of populace politics and massive incompetence.
The lack of collaborative synthesizim is already destroying half of the world’s talents.

It’s all about global age skills of the citizenry and not the armies; as armies cannot feed the citizenry.
It’s about special thinking to figure out how to uplift national skills under entrepreneurialism

Firstly, create an authoritative discussion on these topic, escalate it to top national leadership,
Secondly, create a forum focused on new blueprints and clearly put aside the funding issues,
Thirdly, concentrate on the sleepy and dormant talents and venues collecting dust within the nation.
Final results; national mobilization of entrepreneurialism under a formal agenda

What’s your recommendation and how can you help your nation?

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