Welcome to a brand new year, 2012. It’s no surprise that 2012 will be a better year than 2011, which, we can comfortably say was the worst year in the history of mankind in the 21st century. 2011 has been filled with natural disasters such as earthquakes and tsunamis in Japan, floods in Thailand, and nuclear accidents in Japan, Arab spring in the Middle-East, and economic disasters in Europe that may destabilize the economy in Europe as well as the rest of the world.
The year-end data in 2011 and the data at the start of the year, 2012 indicate an upswing in the US economy. However, the future remains uncertain considering the high unemployment rate (8.5%, lowest in the last 3 years), depressed housing market and the extremely high US government debt. The weakening of the dollar does not help either. Despite all this bad news, there lies some good news – Americans are saving and the savings rate has gone up from 0% to 3.5% of GDP. This is indeed a big turnaround from a non-saving society to a saving society. The TPP has now become a reality and once it starts picking up steam, it will offer a new growth engine for all the economies in the transpacific and America. By the way, Brazil has the record trade levels in 2011 and the future in 2012 even looks better.
The European economic mess is a very serious phenomenon in the faculty of global economics and must be dealt with quickly with some bold actions in order to avoid any adverse effects on the world economy. The debt issues in Ireland, Portugal and Greece were a miniscule as compared with the debt issues we are facing today from Italy and Spain. Spain’s 2011 deficit could be above 8% of its GDP, whereas Italy’s ten-year yields have jumped beyond 7%. When the euro-zone yields reach these levels, they tend to spiral out of control. The European economy is the largest in the world and its destabilization could collapse the future of Euro and put the rest of G-20 currencies in jeopardy.
The Japanese economy is one of the largest economies, but the strong Yen and deflationary pressures on pricing are pushing the economy downward. The Japanese economy was further clobbered by the northern Japan tsunami, and manufacturing disruptions. The floods in Thailand ravaged the Japanese economy and this twin combination caused a severe chaos in worldwide logistics especially in the manufacturing and distribution world especially in the auto industry. The two most important BRICS members, China and India are also slowing down in terms of economic growth, whereas the VISTA members Vietnam and Indonesia continue to show growth. The question is though whether China will have a hard-landing or soft-landing? Despite all this gloomy news, the prediction has it that if there is any economic growth in the world, it will mostly be in the Asia-Pacific region.
The world of politics in the year 2012 represents a sea of changes. More than 25 countries around the globe are readying for top leader changes including US, Russia (read no change) and China. These political changes could influence the world economy for better or for worse. If we look at the Arab Spring, the democracy is fast replacing the dictatorial politics and the pace is a cause for concern. Are these economies ready to embrace these changes and do these countries have the proper infrastructure and skilled resources to adapt to these changes? Only time will tell. The changes in 2011 from Tunisia to Egypt to Yemen swept the dictators alike - Ben Ali, Mubarak and Ali Abdullah Saleh. Who is next? Your guess is as good as mine. In addition, we lost a few dictators in 2011as well: Gadhafi and Kim Jong Il. And finally, the capture and killing of Osama Bin Laden in 2011 must be remembered. It took the Americans almost a decade to capture him and at a cost of tens of billions of dollars paid to Pakistan over the decade.
The technology sector will continue to dominate our lives going forward. More advanced technologies and more applications to make our lives both complicated and comfortable. We definitely owe a lot to one of the tech legends, Steve Jobs who died very early in 2011 after battling for his life for a few years. To remember Steve Jobs, we pay a tribute to him by following his advice from his famous speech - “Stay Hungry. Stay Foolish.”
At one hand, Gartner predicted that in 2012, tech spending will be lower. And on the other hand, Brookings Institution tells us that the growth in 2012 will be in the manufacturing and high tech area. We also believe that smart phone applications area will grow very rapidly and we will have more apps to assist us with our daily chores in 2012. The tablets are making their presence known amongst the big clunky laptops. As the world’s population is graying more and more, healthcare and pharmaceutical companies will be growing rapidly to keep pace.
The roller coaster continues to roll from boom to bust. So, tighten your seat belt and get ready for a ride to a ton of changes in 2012. Who knows, you may be able to connect the dots at the end of the year, if not before. Good luck.
We, at Intersoft Japan have a brand new President (Machifumi Kashiwagi) in 2012 and we plan to focus our business in four areas: IT Outsourcing, IT Solution Services (AML related and others), Consulting Services (IT related M & A Advisory services as per the authorization of our credentials by Tokyo Chamber of Commerce, Tokyo) and Corporate and Individual Training mostly conducted offshore in India.
Good luck in 2012.
David Rakhit Founder & Group CEO
