europe after the brexit...2016/11/08 · •brexit: voters request a more attractive outlook for eu...
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EUROPE AFTER THE BREXIT OUTLOOK AND OPPORTUNITIES FOR FOREIGN INVESTORS
Dr. Martin SCHULZ Senior Research Fellow
Fujitsu Research Institute
Copyright 2016 FUJITSU RESEARCH INSTITUTE
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• Japanese investment in Europe • Strong focus on EU integration
• Europe after Brexit - Four crises and only bad news? • Structural reforms and a new policy framework
• Outlook and Opportunities • EU Potentials?
EUROPE AFTER THE BREXIT
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• Japanese investment in Europe • Strong focus on EU integration
EUROPE AFTER THE BREXIT
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0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Source: Data from CEIC (2016).
Japan’s incomes from Europe and Asia are catching up with US
Japan’s Regional Income Balance (Billion Yen)
4
US
Europe
Asia
JAPAN’S 0VERSEAS INCOMES ON TRACK
Copyright 2016 FUJITSU RESEARCH INSTITUTE Note: Current Account, Primary Income, Net Balance.
0.5
1.5
2.5
3.5
4.5
5.5
6.5199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
Germany
US
Source: Data from IMF-WEO; OECD.
“New Normal” Potential Growth Rates 1990-2030 (%)
5
Note: 10-year moving averages of IMF GDP growth rates at constant prices. 2018-30 OECD Forecast.
Japan
2030 OECD Estimate/Forecast
New Normal
New Normal
2.4%
1.4%
Demography Gap
… WHILE POTENTIALS REMAIN LOW?
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EU
Emerging &
Developing C.
ASEAN5 Middle Income
Crisi
s
Crisi
s
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japan in UK Japan in Germany Japan in Poland
Customer Contact Centre
Recycling
Shared Services Centre
Extraction
ICT
Techn. Support Centre
Education & Training
Maintenance & Servicing
R&D
Business Services
Design, Development
Retail
Headquarters
Logistics, Distribution
Sales, Marketing
Manufacturing
6 Source: Data FT FDI Database (2012).
Japan FDI in UK, Germany and Poland (Cases 2003-2009)
販売, HQ, R&D
サービス
製造, 販売, 物流
Japanese companies took advantage of regional potentials and market integration
JAPAN-EU INVESTMENT: INTEGRATION FOCUS
6 Copyright 2016 FUJITSU RESEARCH INSTITUTE
POST-CRISIS FOCUS ON LONDON
Japanese M&A Cases in the UK and Germany (2011-2016)
U.K. No. Germany No. Commercial Services 13 Chemicals 11
Internet 10 Electronics 11
Food 9 Computers 9
Holding Companies 9 Machinery-Diversified 9
Computers 7 Auto Parts & Equip. 8
Alt. Energy 7 Commercial Services 5
Advertising 6 Misc. Mfg 4
Software 6 Pharmaceuticals 4
Entertainment 4 Biotechnology 3
Misc. Mfg 4 Hand/Machine Tools 3
Total 139 Total 109
Source: Bloomberg as of 2016.05 7
Japanese companies took advantage of regional potentials and market integration
UK
Services
HQs, R&D
Germany
Mfg, Sales
R&D
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8 Source: Data from UK Office for National Statistics; CEIC.
UK INVESTMENT LEAD TO TECHNOLOGY BOOM
8 Copyright 2016 FUJITSU RESEARCH INSTITUTE
0
500
1,000
1,500
2,000
2,500
Computer & Related Activities
Motor Vehicles & Parts
Post & Telecommunications
Machinery & Equipment
Electrical Machinery &Apparatus
Office Machinery & Computers
Investments in R&D in the UK (GBP Mn)
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• Europe after Brexit - Four crises and only bad news? • Structural reforms and a new policy framework
EUROPE AFTER THE BREXIT
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• Brexit: Voters request a more attractive outlook for EU integration
• Eurozone Reform: Difficult push for structural reforms
• Ukraine Crisis: EU cannot intervene or stabilize partner countries
• Middle East Crisis: Instability requires new partnerships with Iran, Arabia, Turkey
Brexit EU Market Integration EU Governance Reform
Ukraine Russia Relations Cold War Security Risks
Eurozone Reform New Financial Policy Structural Reform Middle East War
Refugee Crisis Iran-Arabia-Turkey Strategies
EUROPE – 4 CRISES
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Source Map: https://www.espon.eu/main/Menu_Publications/Menu_MapsOfTheMonth/ Source Photos: http://www.marineinsight.com/wp-content/uploads/2015/04/migrants.jpg; http://www.europarl.europa.eu/news/en/top-stories/20150831TST91035/Migration-a-common-challenge
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IMMIGRANTS TEST GLOBALIZATION
13 Mill. Refugees Syria Crisis: 2.2 Mill.
2015: 5411 Migrant Deaths
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Source: EU Ameco Database (2016)
Note: 2000 =100, based on compensation in euros. 12
50
70
90
110
130
150
170
201520142013201220112010200920082007200620052004200320022001200050
70
90
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130
150
170
2015201420132012201120102009200820072006200520042003200220012000
Services
Manufacturing
Japan
50
70
90
110
130
150
170
2015201420132012201120102009200820072006200520042003200220012000
Services
Manufacturing
Industry
50
70
90
110
130
150
170
2015201420132012201120102009200820072006200520042003200220012000
Services
Manufacturing
Services
Manufacturing
Germany UK
US
Labor Compensation by Sector (2000=100)
RESTRUCTURING CREATES LOSERS
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US - Trump: “Make America Great Again!”
UK - UKIP: “Controlling our own borders, making our own laws, running our own country!”
Source: Bloomberg
Source: www.donaldtrump.com
Sources: http://ichef.bbci.co.uk/news/660/media/images/79755000/jpg/_79755138_5489a5d7-c4a8-4f59-bb09-8420fec1eeb7.jpg; https://files.opencanada.org/images/RTX2OYD0.6969629d.fill-940x627.jpga; http://www.bilaterals.org/IMG/rubon205.jpg; http://www.globaalmarshallplan.org/en/stop-ttip-eci-campaign-explained
Canada-EU FTA (CETA) a litmus test Japan-EU FTA
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GROWING TRADE OPPOSITION
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MIDDLE EAST LONG-TERM STRATEGIES
ISIS
Source: Map: http://lecourrierdumaghrebetdelorient.info/arab-world-maps/arab-world-maps-a-proxy-war-in-the-middle-east/#prettyPhoto
Shi’a Muslims
Sunni Muslims
Engaging Iran
Turkey Immigration Support
Egypt Stabilization
Arabia Stability
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EU: SUPRA-NATIONAL TO INTER-GOVERNMENT
EU Commission
Council (Heads of State)
Central Bank
EuroGroup (Finance Ministers)
President
President
President
President
EU Governance New EU Governance
Brexit Russia Immigr. Euro
Strong inter-government EU Council enforces more executive powers
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Supra-National Integration
Inter-Governmental Reform
Parliament
Council of Ministers
External Action Service
Foreign Ministries
Presidency
Troika
Foreign Affairs Council (Foreign Affair Ministers)
Stability Mech.
Director
President High Representative
supervision appointment
Legislation & budget
co-decision
arbitration supervision
FROM TRADE REFORM TO TECHNOLOGY
R&D, ICT, Services
Governance, Regions
Globalization, EPA/FTA
Koizumi (2002)
“Agenda 2010” (2003)
Labor Market
Abenomics (2020?)
“Debt Brake” (2009)
Government Finance
No “Schengen”
(1995)
Immigration
Abenomics (2015)
Single Market (1993)
Agriculture
University (2004)
“Bologna” (1999)
Education
Security Laws (2015)
Collective Sec. (1994,1999)
Security Grid
(2016) Renewable
(2000, 2011)
Energy
TPP (2018?)
Single Market (1993)
CETA (2016) Japan FTA (2017)(?)
Trade
Abenomics (2012)
Euro (2000)
Exchange Rate
Koizumi (2003)
Banking Union (2015)
Finance
Smart Japan (2014)
Industrie 4.0 (2012)
ICT
New Focus: Technology & Investment?
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Reform Policy Comparison: Japan – Germany
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Industry Platforms Smart Factories
Mfg. 20%
INDUSTRIAL POLICY: INDUSTRY 4.0
7% Consumer 29%
13%
Consumer Platforms
Global User Access, Markets, Standards, New Business Models
Smart Automob.
1.5%
Smart Machines
2.2% Smart
IT 1.2%
Smart Agricult.
1.2%
Smart Chemical
2.2%
7% 7%
Retail
Transport
Healthcare
Government
4% Utilities
Internet of Services Partner Ecosystems
Internet of Things Device Integration
IoT Market Shares
Source: Data from IDC, Fraunhofer (2014)
Reform Opportunities
I40 Productivity Growth
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2010 2018
IoT Market “Revolution” +20% YoY (Market Size)
1970 2030
I40 Market “Evolution” +1.5% YoY (Value Added)
Source: Graphs: Acatech, Siemens.
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INSTITUTE
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• Outlook and Opportunities • EU Potentials?
EUROPE AFTER THE BREXIT
Copyright 2016 FUJITSU RESEARCH INSTITUTE
UK government estimates of Brexit costs:
-6.2% lower GDP in 2030 with non-favorable EU trade terms
-3.8% lower GDP when joining the general European Economic Area (EEA) FTA
Swiss case depends on extreme globalization and swift reforms
High immigration, currency peg to euro, industry restructuring, deflation
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-4
-2
0
2
4
6
8
10
Switzerland
Germany
UK
Japan
Note: Based on purchasing power parities (PPP) calculated as “international” dollars. Source: IMF-WEO Database (2015).
Real GDP per Capita Difference Relative to the EU (Difference – 1991 Difference)
UK BREXIT POTENTIAL?
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$1000
50
100
150
200
250
300
350
400
2003 2005 2007 2009 2011 2013 2015
UK IT Stocks
EU IT Stocks
UK CHALLENGE: SERVICE CENTER AT RISK?
Note: EU indices exclude UK stocks.
MSCI Stock Market Indices for the UK and EU (ex UK) (2003=100)
Source: Data from Bloomberg.
UK Stocks
EU Stocks
UK Stocks
20 Copyright 2016 FUJITSU RESEARCH INSTITUTE
70
90
110
130
150
20172015201320112009200720052003
European Union Germany Spain United Kingdom Switzerland United States Japan
Source: Data from AMECO Database (2016).
Real Disposable Income (PPP)
EU REGIONAL POTENTIALS
Disperse opportunities: Wide variety of real income, profit and productivity growth
70
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110
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130
140
150
20172015201320112009200720052003
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90
100
110
120
130
140
150
160
20172015201320112009200720052003
90
95
100
105
110
115
20172015201320112009200720052003
Net Operating Surplus Labor Productivity
Swiss
Swiss
Swiss
US
US
US
EU
EU
EU UK
Spain
Spain
Germany
Germany
Germany
21 Copyright 2016 FUJITSU RESEARCH INSTITUTE
-100
0
100
200
300
400
500
600
700
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Source: Data from Bloomberg (2016.05.16).
Main Stock Indices (JPY Base)
EU MID-CAP OUT-PERFORMANCE
Significant opportunities: EU mid-size companies gain from market integration
Mid-Caps (JPY Base)
Swiss
Germany
Austria
UK Spain
Italy
US Japan
-100
0
100
200
300
400
500
600
700
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
US
Japan
Germany
Swiss
UK
EU
Italy
22 Copyright 2016 FUJITSU RESEARCH INSTITUTE
Source: Data from IMD (2015, …). Copyright 2016 FUJITSU RESEARCH INSTITUTE
IMD Competitiveness: Macro Economy
EU POTENTIAL: COMPETITIVENESS
EU integration pays off for Germany
0
5
10
15
20
25
30
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Japan
Germany
US
23
Source: Data from IMD (2015, …).
IMD Competitiveness Macro Economy 1999 2015
-60-50-40-30-20-10
0Economy
Trade
InvestmentEmployment
Prices
-60-50-40-30-20-10
0Economy
Trade
InvestmentEmployment
Prices
Challenge: Price Competitiveness US strong overall economy Germany high prices, low employment
Change: Market Reform Prices down, but USD challenges trade Price competitiveness boosts employment
USA
EU POTENTIAL: MACRO ECONOMY
Significant macro framework improvements through EU integration
Germany
JP
Copyright 2016 FUJITSU RESEARCH INSTITUTE 24
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-40
-30
-20
-10
0Productivity
Attitudes
FinanceManagement
Labor Market
-50
-40
-30
-20
-10
0Productivity
Attitudes
FinanceManagement
Labor Market
IMD Competitiveness Business Efficiency 1999 2015
Challenge: Labor Market US strong efficiency except labor Germany stagnant labor market, low
productivity
Change: Governance Reform Cost cutting depresses sentiment Labor reform boosts productivity
USA
EU POTENTIAL: BUSINESS EFFICIENCY
Source: Data from IMD (2015, …).
Business efficiency boost during EU integration in Germany
Germany
JP
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0Finance
Fiscal
InstitutionsLegislation
Society
-70-60-50-40-30-20-10
0Finance
Fiscal
InstitutionsLegislation
Society
IMD Competitiveness Government Efficiency 1999 2015
Challenge: “Competition with Asia” US strong framework German underperformance
Change: Institutions & Finance Financial crisis hits social framework Institutional efficiency, social flexibility
EU POTENTIAL: GOVERNMENT EFFICIENCY
Source: Data from IMD (2015, …).
Financial crisis and governance reforms created instability
USA
Germany
JP
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LONG INTER-GOVERNMENT TRADITION
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Europe’s first “constitution” of 1356 (Golden Bull) regulated inter-government elections of the Holy Roman Emperor for almost 500 years.
Charles IV established flexible European inter-government policies
Charles IV: Heir of Luxemburg, raised in Paris, ruling from Bohemia, prepared Europe for the modern age
出所: www.Welt.de; www.begleitprogramm-karl-iv.de; www.mystika.cz
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• Brexit: Negotiation “noise” and uncertainty • “Hard Brexit” options and strong trade integration lead to a new “special
relationship” with full market access but limits for social security etc. • UK policy initially expansionary, but needs to turn restrictive from 2018 to
stabilize currency and increase competitiveness
• EU Reform: EU of “many speeds” emerging • EU Council has become the de-facto executive institution, enforcing national
reforms from banking to security • National (reform) policies lead to different national levels of integration with
a stronger focus on trade, industrial policy, competition
• Foreign Investors: Focus on integration opportunities • EU integration continues with more competitive diversity and restructuring
opportunities • Manufacturing opportunities in the UK, service improvement in Germany,
restructuring potentials in Spain, …
EUROPE AFTER THE BREXIT
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