globalEDGE International Business Blog

So how did Iceland get into this situation? Review an earlier post on the globalEDGE blog. Essentially, Iceland’s private sector banking system was chiefly comprised of three main banks, and at their peak, their assets were so large that they accounted for more than ten times the GDP of the country of Iceland itself. When the credit crunch and financial crisis hit, you can guess what happened next. The banks lost their assets, nearly 90% of them, investors lost their money, and since the assets of the banks were greater than the country of Iceland’s GDP, there was no way they could receive a bailout from them. The Icelandic currency, the Krona, has lost more than half its value, and Iceland’s GDP is expected to dive near 10% for 2009. Other stats on Iceland are available on globalEDGE.

So who does Iceland turn to? The U.S. Federal Reserve, Bank of England, and European Central Bank have all turned them down. So Iceland turned to Russia. Russia was eager to hear Iceland’s plea, however, the bail-out may not come anytime soon. Iceland has maintained that it will not change its foreign or security policies for a bailout. Unfortunately, a bailout from Russia would likely come attached with a need for just this type of policy change. In the meantime, Icelanders must do as the Vikings living there before them did, and perhaps cause a little havoc in order to get their country back from it’s financial abyss. Oh well, at least travel there is cheap! More to come soon!

For more on this, check out these articles from CNN and The Chicago Tribune!

Part of the reason is that spending is shifting to services, which is much harder to globalize. As technology enables easier transportation and manufacturing of goods, human attention becomes comparatively more valuable.

Do you foresee the same future? globalEDGE has a lot more information on the subject in our globalization section of the Resource Desk. Also, check out the Wall Street Journal book review.

The Indian government is not oblivious to the harmful effect the problems in the diamond industry can have. Therefore, it has proposed a package to revive the jewelry sector. The document proposes an extension of financial assistance to gems and jewelry units that maintain safety equipment. Furthermore, the proposal includes an offer of financial assistance for setting up hallmark certification and gem testing centers.

The global economy slump has reached yet another industry, leaving people not only unemployed but also pushing them towards suicide. India is taking measures to aid their diamond industry; however for how long can governments keep on extending financial aid to industries that are facing serious financial problems?

But for some countries it isn’t just about financial loses - instead, the concern is food security. According to the International Food Policy Research Institute (IFPRI), the credit-crunch has lead to a decrease in the flow of capital towards long-term investments in the industry. This leaves areas that already struggle for food at an even greater risk to go hungry, especially nations in Sub-Saharan Africa and Southeast Asia. The UN Food and Agriculture Organization says that consumers in these countries suffer twice over due to decreased purchasing power. This means that affordable options are limited to foods with low-nutritional value.

The struggle now is to ensure economic stability for these countries. Asia-Pacific Economic Cooperation (APEC), the multi-national Asian alliance for trade, recently met in Lima to discuss the impact of the downturn on agriculture. In addition to revising the APEC food system to ensure affordable prices, APEC also reaffirmed their support for increased investment in agricultural technology and biotechnology.

Illustration credit: IFPRI

The IFPRI agrees - in a recent presentation to CGIAR, they advocated not only increased investment into agriculture technology, but also reformed economic and agricultural policies. They also call upon financial institutions such as the World Bank to “maintained their renewed focus” on food and agriculture and increase their involvement in financing food science initiatives.

One of them is teaching. Many who have lost their jobs are considering retraining and going back to school, thus the interest in degree programs, new certifications, and job training has never been greater. The Labor Department said that the education industry added 9,800 jobs in November and the healthcare industry added 34,000. Furthermore, with an aging population, there is a greater demand for care and health services. "The healthcare industry continues to be the healthiest sector in the U.S. job market," said Diana Fitting, Vice President for a staffing company called Adecco. "The Baby Boomer generation is aging and it's helping to keep healthcare growing." Lastly, as we are entering tax season and financial firms are under intense scrutiny, there is an expected growth in job openings for accountants.

One should not only look in what kinds of jobs are available, but also where. Where you live can make a huge difference in what you earn. Also, when it comes to marketing your degree, it’s all about the location. For example, top locations for physicians are places with high levels of retirement such as Arizona and Florida. Educators can most easily find jobs in Nevada, Arizona, Texas, and Georgia; Lawyers in the District of Columbia, and those with degrees in Finance – in New York.

Even though the economy is not doing well, it is not all doom and gloom.

But just in case you thought national security was not something we could afford to worry about as much, a recent CNNMoney.com report may change your mind. Wouldn’t it make sense that national security, or more specifically international security, and financial stability are intertwined?

The big picture is something that all of us as consumers need to remember. This of course doesn’t mean that consumers worldwide should start spending money because it would simply stop terrorism. But maybe it would be better to keep that perspective.

If we could guesstimate where a hypothetical terrorist attack would happen next, Western nations and tourist hot-spots would probably be at or near the top of the list. But the problem is that this doesn’t really hold true any longer. Given the recent attacks in Mumbai and piracy off the coast of Somalia, we now know that Western nations aren’t the only ones at risk. Security is no longer a concern only for nations directly involved in things like terrorism, but also for any country experiencing economic hardships during this downturn.

Understanding the twin aspects of South Africa's sophisticated economy and emerging market complexities, however, is the key for any company to be successful in the region. Quirks such as unloading goods from the truck by hand because the retailers can't afford forklifts, or lack of consumer access to media/advertising are things about the local market that South Africans have learnt to accept. The globalEDGE module on Doing Business in Africa could be helpful if you wish to learn more about such issues.

So is Africa the next China? Although growth has slowed and inflation increased in the recent past, there is also a growing trend of consumerism and foreign interest in the area. In March, Industrial & Commercial Bank of China bought a 20% stake in Standard Bank. Britain's Vodafone (VOD) in November took control of Vodacom, a pan-African cellular carrier based near Johannesburg. And yet, Mozambique in Sub-Saharan Africa remains one of the poorest countries on the planet!

Also, here is a podcast with first hand experiences about doing business in Africa. Overall, there has been a dramatic increase in political stability and reduction of conflict over the past 10 years in the region. And as things continue to improve, ample opportunities for international business will arise in the region.

The declining housing market, tightening credit, and perpetuation of an apparent economic recession have already resulted in discretionary spending among consumers, and this trend won’t appear to buck for the holiday season. Retailers should focus on keeping their inventories and payrolls low in anticipation of a dismal holiday selling season.

As technology continues to advance, retailers have begun utilizing it in order to better understand what products their customers want, as well as the best way to present such products to the customer. In an article by MarketWatch, they describe the services of QuantiSense, a technology and management consulting firm which has designed an offering called “Developing Your Playbook,” which aims to help retailing firms implement Business Intelligence software in the most effective manner possible.

As the purse-strings tighten and people begin to worry more about buying the essentials rather than the pleasurable indulgences, retailers will see a decrease in sales. However, by using technology in a manner which can better sharpen the aim of retailers into selling what customers want in a manner they want it, retailers can use technology to help minimize losses in the near future.

It all sounds great and it’s a new high for technology, but is it really what the world needs right now? Another “cool” sports car? Gas prices might be less than half of what they were during the summer but it doesn’t mean the problem is solved. Humanity is too dependent on petroleum and we need to find substitutes for it. It is not the time for another unnecessary luxurious car!