AIB 2014 Annual Meeting: McKinsey chief on B.C.’s place in the global economyJun 26, 2014
The 21st century is going to see an unprecedented pace of growth in Asian countries, resulting in some 1.7 billion new middle class consumers being created in Asia alone. And while many organizations are unprepared for the change that is coming, B.C. is well positioned to play a significant role in the “Asian century”.
That was the message delivered by Dominic Barton, Global Managing Director of world-renowned consulting firm McKinsey & Co., in the keynote speech at a special Vancouver Board of Trade luncheon to close the Academy of International Business (AIB) 2014 Annual Meeting.
Barton was in Vancouver to receive the 2014 AIB Fellows’ International Executive of the Year Award, which recognizes a business leader who has significantly improved the stature and role of international business at home and abroad.
In his keynote speech he discussed B.C.’s place in the global economy – how the local identity affects its international competitiveness, and where it fits in the duality of being local yet global at the same time.
Since 1950, the centre of the global economy has been shifting towards Asia, a stunning rate of progress considering that it had taken some 1950 years to shift from Asia to the West previously.
This startling shift in economic power has resulted in significant change that B.C. must be aware of if it is to capitalize. Some 120 of the Fortune 500 companies are now headquartered in emerging markets, for example, and are investing at double the rate of their western counterparts. Barton noted that it is necessary for B.C. to react to this scale and speed: “Our metabolic rate has to go up.”
The growth in Asia will create new markets that B.C. has the potential to take advantage of, not only in natural resources, but also in water, food and energy.
“There will be a 40 percent excess of demand vs. supply for water, given the 1.7 billion extra consumers that will be here in the next ten to fifteen years,” he said. “As a result, we will see tensions. We are already witnessing tension over water disputes between China and Vietnam.”
Barton explained that it is important not to look at Asia as one big region, but rather as a series of cities. “There are 313 cities in Asia that will account for 33 percent of global growth in the next ten years, many of which currently have economies larger than Switzerland,” Barton said. “So the question for B.C. is: are we positioned to play in those cities? The world is going to be Asia-dominated and it’s going to happen very quickly. We need to get granular about the business opportunities.”
Moving on to the specific opportunities for B.C., Barton noted that it has a strong starting point, but can do far more. “I would assert that we are currently punching way below our weight – there is a big opportunity being presented to us here.”
He revealed seven ideas for B.C. to capitalize on the opportunity presented by the rise of Asia, identifying sectors such as tourism, liquefied natural gas (LNG), agriculture, and education as significant export opportunities.
He also suggested initiatives such as the creation of an international advisory board for B.C. – a concept that is already widely used in Asian cities – and an increased openness to foreign direct investment, including proactively seeking out investment rather than waiting for it to arrive.
He expressed the need for haste in moving on these ideas, with LNG one example of a sector that is fast moving and has the potential for B.C. to miss out on if it does not act quickly.
“My sense is that we have less than five years to get our LNG business up and running – there are a lot of other countries that are moving quickly and have a lot of product that they can supply,” he said. “These people are going for 25 year contracts. If we pop up on the scene after a few years then it will be too late. I think we underestimate the amount of activity that’s going on in different parts of the world.”
Barton concluded that ultimately B.C.’s success will depend largely on the actions of businesses engaging with Asia, but stressed that the potential exists to turn B.C. into an economic superpower if it capitalizes on the opportunity that Asia’s rise to power has presented.
“In 1969 the World Bank told South Korea that they have no business getting into the steel industry – but they built a steel company, and it is now the most successful steel company in the world,” he said. “It comes from ambition. And I wonder what our Korean friends would say if they had the chance to live in B.C. We have the talent, and the resources, and I think that ambition is a talent that we deserve.”
For more information on the AIB 2014 Annual Meeting, visit https://beedie.sfu.ca/AIB2014/index.php