 summer Davos in Dalian is how we are in really a two-speed world, two speeds of development, two speeds of slowdown, there will probably be two speeds of recovery and the only place where there's gonna be a fast speed is going to be in the emerging world, emerging economies. So much attention has been focused on the BRICS, Brazil, Russia, India, China, but we all know that the next 30 years will not be like the past 30 years. We all know that the BRICS themselves are reaching maturity and so in the search for speed, the search for development, the search for investment opportunities, we have to look elsewhere, we have to look to frontier markets, we have to look to new markets. The purpose of this session is to delve into those new markets to think about those frontiers. We've got a great panel here today and I hope that during the next hour we'll be able to think about some themes, some of the key things I think. First definition, what countries should we be including in this list of frontier markets? What regions? How do we look at the countries to include them in this frontier or not? What are the lessons that we've learned from the BRICS experience? What are the lessons for the countries themselves about regulation, about openness, about market participation, about protectionism? What are the lessons for companies as they want to participate in this remarkable growth? How do companies succeed, whether they be foreign companies or domestic companies? How do they succeed within these frontier markets as they experience dramatic growth? What happens with early penetration of the market? What are the opportunities in BRICS for being first movers? What are the key policy measures that are needed in terms of rule of law, strengthening institutions, fighting corruption, liquidity in the market, and creating an overall positive environment for investment? And finally, how do we ensure long-term healthy growth? How do we ensure that some of the benefits of this growth, most of the benefits of this growth, remain at home with a host and don't just escape abroad? So to discuss these issues, we've got a great panel. We've got Leo Liengou, who is vice president of the Export-Import Bank of China, who's also had experience with the ADB, particularly during the Asian financial crisis. We've got Khalid bin Bandar bin Sultan, who is the chairman of Daim Holdings. We've got Dahengir Hajiyev, who is chairman of the board of the International Bank of Azerbaijan. We've got Nguyen Kam Tu, who is the deputy minister of industry and trade of Vietnam. And we've got Tharn Khana, who is a Jorge Paolo Lehman professor at Harvard Business School, and who has written the book on how to succeed in emerging markets. And since he's written the book, I think he should start and give us a few words of wisdom to set the context of this discussion. Is this on? Yes. It seems to be the pattern of the day is to get the professor first. That's my third panel that starts with me. But I'm very pleased to be here, and pleased to participate in this wonderful discussion. I guess I'm going to pick up on a particular question that you asked, which is what is it that we've learned from the brick experience and the emerging market stories that have saturated the airwaves and the print media and so on for the last perhaps 20 years in many ways and even longer. I think I'd say that the first thing that we've learned in my view is that there are many different ways to skin the cat. In other words, there are many different models that seem to work. They do have something in common, which is if you take the term emerging market seriously, what it really implies is that ways of bringing buyers and sellers together are improving. That it's possible for people to come together to transact, to buy simple things, to consume, to invest, to hire talent, to go places, whatever activity they wish to do, it's becoming easier and easier to do it. That's the definition of a market. A market is something that just brings buyers and sellers together. Emerging, of course, means literally that that it's something that didn't exist before, is coming into being, is therefore facilitating economic activity. If you apply that very simple yet powerful definition, almost every market has a bit of an emerging market buried inside it. I think what you learn and right there, just from the BRIC countries, you learn that there are many different ways to make this work. I like to contrast China and India because to me, in many different ways, they are the mirror images of each other, the inverse of each other. What China is good at, India tends to be pretty bad at. What India is good at, China is also pretty bad at. In a sense, starting from roughly the same time, late 1940s, in both countries' histories, they went on completely opposite paths. Yet in some ways, they've had some successes along the way. China has a quick look outside as you come up to this convention center, will convince you as just spectacular infrastructure, just unbelievable infrastructure in a very short period of time. India, embarrassingly, couldn't hold a candle to this, continued to do this. India is the only country in my country of origin, so I find it embarrassing. On the other hand, I think India has done a much better job than China at nurturing the soft infrastructure of development. Perhaps rule of law, perhaps property rights, intellectual property rights, things of that nature. You see a much higher concentration of knowledge intensive industries in India. Both these are paths to development. It's a little hard to rank one better than the other. I could debate you at Noseum about whatever your persuasion is. I'll argue the converse indefinitely. I think the point is that depending on your priorities and which you wish to put first, they both are models of work. Then you move on to the Brazils of the world that are flush with commodity riches or the Nigerias or South Africa's of the world, Indonesia's perhaps. They're following a very different model. It's a little bit of a hybrid of the China and the India models in some abstract way of thinking. It also works and in some ways is even healthier than the China and the India model. That's the first point I would say that there are many different ways to make it work. It's incumbent upon all the countries, represented by the panel as well as anywhere else, to ask what are the fundamental strengths of their own country's model as opposed to trying to put it in a preexisting box of the United States or Europe or some other brick country. The second point is that there are some other confounding variables that make it hard to rank these countries unambiguously. In particular, I want to highlight the role of demography. To illustrate this, I'll go back to the China-India comparison. India, in some sense, in the next generation, next quarter century, is going to go through the same demographic transition that China has just almost completed. In other words, the ratio of working age and non-working age population is going to rise in India in the way that it rose and plateaued in China and is now going to fall in China. Some demographers say that if you accept that China has grown at roughly 10 percent for a long time, 10 percent annual growth rate for a long time, that a good 3 to 4 percent of that 10 percent is accounted for by a very favorable age structure. That is now lost to it as China ages. It confounds the evaluation of policies that are not already set in stone. Demography is something that is set in stone because our demographic futures for the next 25 years have already been determined by our actions in the past. I would highlight the role of demography in being careful about evaluating whatever models different brick countries and others are pursuing. The last thing I would say, and this is more targeted to my adopted country, the United States, and the developed world, is for those of us who live in the developed world not to make the mistake of assuming that emerging market equals poor technology and things like that. Of course, there is by and large much more poverty in the emerging markets than there is in the developed world, almost definitionally, but there are plenty of pockets of excellence and plenty of examples of leapfrogging that are going on. In some sense, I prefer to think of each environment, whether it is the United States or China or Brazil or India or what have you, as being its own specific development petri dish, its own specific development center for innovation, where the particular things that come out of that country are those that are best suited to the problems of that country. And when you begin to use that lens to look at things, what you realize is that there are interesting things that every society can contribute to the rest of the world. And I can use some, I'm sure we have some examples of that as we go along, but let me see the floor back to you, David, so we can hear from others. Fantastic. Thanks. It's a great introduction. But one of things when you look at Brazil, Russia, India, China, of course they all have huge scale. So I'd like to ask you, Mr. Adil, when you, a country like Azerbaijan or Vietnam or Ecuador or Chile, how do you think they should look at their big neighbors and how should countries and companies wanting to invest in you look at the region as opposed to a specific country? Thank you, David. You know, when we look at big countries, of course it's one of the biggest countries and one of the biggest economies in the world, maybe 50% of the global market. But I think one has to take a look at what treats out of these countries, I mean, Brazil, Russia, China and India, what these countries just surrounded, which countries, I mean, which blocks and treaties and trade and economic treaties they are part of. Let's say Russia. Russia is and Russia and Azerbaijan used to be in one country, Soviet Union, and after the collapse of Soviet Union, we are still in the CIS and Commonwealth of Independent States and on one side. On another side, Russia has a treaty with Customs Treaty with Belarus and with Kazakhstan. And such a small country as Azerbaijan, maybe small but, you know, the fastest growing economy on the roads between north and south, east and west, and with big oil and gas reserves, could be just an example of how one can penetrate just markets, big markets and maybe just begin to gain experience in one country, in countries such as Azerbaijan and others, Georgia and others, just which used to share the common traditions, still which have strong economic ties, but these countries and just to penetrate these countries, then just to go ahead with such big, huge markets as, let's say in this part of the world, Russia and China and India itself. I can give many good examples of doing this. And you know that Azerbaijan will have out of seven oil and gas pipelines, we have Bakutbilis-Ejhan, which connect oil reserves and oil and gas reserves of the Caspian Sea basin to Europe and to the rest of the world and connecting the same Kazakhstan and maybe China to this route and maybe in the future, I mean, if such project as Nabok will be realized. And at the same time, there is construction of Bakutbilis-Kars-Akhalkalake Railroad will connect, which will restore the route from so-called Silk Road, Silkway from China through Kazakhstan, through Azerbaijan and Russia and to Europe. So there is a lot of opportunities and I think one has, again, to explore the situation and possibilities within around the Greek countries in order just to penetrate the Greek countries market. Right, thank you. Vice-Minister, I'd like to turn to you. What does it like to be in the government of a frontier market? What are the policies that you think that you need to put in place, especially learning from the BRIC experience? Maybe let me go a little bit broader than that. You have talked a lot at an interior point of view about the frontier market, emerging market. So let me try to talk about that more practical from the exam of our country. So what is Vietnam? Vietnam is now quite a small economy, which is newly developing. You know that our country started to open to the outside world only 25 years ago by our innovation policy, well known around the world as Doi Mui. And today, Vietnam is still at a very low rate of development, low level of development. Only in 2010, we escaped the status of a poor country and joined the group of medium income countries by the UN standard. But nevertheless, the Vietnam is widely classified as a potential country. We are here, was included in the group of countries with high potential like NX-11 or CVEST, for example. And you are classified as a frontier market by the different organizations. For example, Morgan Stanley, Capital International, leased as of May 2009. Or FDSE leased as September 2010. Or recently, Standard and Poor Frontier Broad Market Index as of April 2011. So what is the reason of that? I think what is characteristic they take to classify Vietnam like that? I think that there are a number of things to talk about. Firstly, I think that our country is a medium-sized country with a quite high population, with 90 million people, which is the 13 largest populated country in the world, just after Japan and Mexico. And more than that, we are now at the golden age of population, which means that 66 percent of the population is in the working age. And with a high rate of literacy, more than 95 percent is the first thing I think. The second thing is that our country has a lot of resources. For example, Vietnam is now the first, the third largest producer of natural rubber. The third in the world, the third is the producer of oil in Asia. The second largest producer of coal in Asia, for example. And besides that, I think that our country has a very high rate of road, which is average during the 25 years of average rate was about 7.5 percent, which is the second after China at 9 percent. Even during the three difficult years from 2008 to 2010, the rate was still kept at 6.5 percent, which is the third after China-India. And projected for next year, for example, the HSBC project for 2012, our rate is above 7.5 or 12.1 percent. It's, for comparing, it's 15 percent higher than for the rest of Asia. And what is behind that high rate of growth? I think that there are some things. Firstly, it's the economical policy of the government. So I take one example. Even Vietnam is newly developing country, but we are very open to the outside economical world. And now our combined number of exports equal to 176 percent of our GDP. Or from the outside, we are actively integrating in the region in the world market. We are now a member of WTO ASEAN, APEC, ASEAN. We have a number of FDA with different countries, including the United States, EU, and Russia, and so on. And the second thing that the government pay a lot of attention to build a full constitutional legal system, include the legal system for which they are relating the investment. For example, now Vietnam has a common investment law, which make not differences between the sources of capital, even domestic or foreign. And making foreigners safe, doing business in our country. And the third thing that I think behind that growth is that the government put a big attention about administrative reform. We have a long-term national program for administrative reform, which reduce red tape and make it easier for citizens for the investment in our country. And one more thing I think that it's government pay attention about putting a lot of money to develop infrastructure and training labor forces for investment. I think all that highlight the high rate of the development. And I think that that is characteristic of the frontier kind of emerging market. Thank you. So the openness, the legal system, the reform, and the infrastructure, those are the good points. So Khalid, when you look for investment opportunities, what are the key things that you look for in the frontier markets? Very simply, stability. Without stability, and following on from that, sustainability. Those are the two most important things. Not just being Saudi, but all of our investments as a private company are in Saudi Arabia. And some people call me a bit of a lunatic, obviously, as a result. It's not the most fun neighborhood to be in sometimes, politically. It's a harsh climate. I always like in Saudi Arabia, if it sort of explained to people the issues we're going through as a nation, it's incredibly wealthy, no question. But Saudi Arabia is a country that won the lottery. I don't know many CEOs and chairman of companies who started off with a lottery win. The building up of something is usually concrete, hard work, long-term vision, experience, et cetera. We were a very poor nation, found ourselves with a lot of wealth, and we've been developing, trying to develop ever since. That's a bit harsh. There's a lot in Saudi Arabia that is not just a lottery winner. But the key thing for us is developing industries outside of oil and gas in the petroleum industry. We're trying very hard to develop into petrochemicals, which is wonderful, but it still goes back to the initial thing. So I suppose in a nutshell, people probably think I'm a bit of a lunatic. I just explained that it's not a great place to invest, but that's not the case. In reality, it's a wonderful place to invest. Part of the issues that cause the problems that I just highlighted are being placed that is incredibly wealthy, but doesn't have a lot of the bases of a full economy, is where the opportunities are. We have inefficiencies, we have a market that is not tapped. We have incredible growth. It's nowhere on the level, obviously, of some of the BRIC countries, but I think that's worked to our advantage. If I could just pick up on the lessons, one of the most important lessons that I've sort of picked out of the BRICs countries and how it would apply to somewhere like Saudi Arabia is too fast growth is not necessarily a great thing all the time. It erodes all of the social fiber of a nation, traditional values you lose, social issues that rise as a result of dramatic change, and sometimes it's nicer to be lucky than smart, and we found ourselves quite lucky developing along with the pace of oil. Now, with that said, that's happened. We're in an incredible boom time. We need to now channel that as a nation, both private and public, into creating a diverse economy outside of the oil and gas sector. There are opportunities there. We're very lucky we have government willingness. We have private sector willingness, although not as willing as government, I don't think just yet. And we have people looking at us now. This kind of discussion is highlighting the fact that people are interested in these emerging markets, which may be a definition frontier. It's a tough place to be. It's a tough neighborhood. My father used to say three of the greatest religions on earth were all sent to the same part of the world, and if God can't make us listen, then, you know, it's obviously a difficult group of people to deal with. But notwithstanding, I think it's a wonderful place to invest at the moment. There's lots of opportunities, and I'm sure we'll get into it as a result of the discussion going forward. Thank you. So, Lillengo, let me finish with you. Can you talk a little bit from China's point of view? Are these frontier nations competitors, or will China work in a cooperative, complementary way? Oh, thank you. Thank you very much. First of all, I would like to briefly introduce you our understanding of frontier market. I think they have some common features. First, in recent years, they've joined a very rapid growth rate of about 6 percent GDP growth. Some countries even enjoying 10 percent of GDP growth rate. But, however, their development status is still very primitive. For example, in investment environment, all the other business climate are yet to be further improved. Secondly, they all have their advantages. They all have their very strong willingness to develop. And also, they need international cooperation and foreign aid. So, for those frontier markets, for example, in terms of the resource, in terms of the reform, they have very strong willingness and commitment. And they carry out some big initiatives, but they need international cooperation. They need very good international support. That's very important. And thirdly, in terms of the market, they have a big potential to develop. However, they still have a huge uncertainties, or sometimes we call it a risky factor. So, from the banker's perspective, we want to manage risk. No risk, no returns. So, I fully agree with the speaker that you have to assume you have to take certain risks. Otherwise, you can hardly call those markets as frontier markets. So, after three decades of reform, I think in China, one thing we learned that those frontier markets are, will be the future trend of the globalization. And this kind of trend is a fair trend. And they will provide opportunities for us to improve the livelihoods of the people and also redistribution of the global wealth, which is a very necessary trend to improve the livelihoods of people in other regions. So, if you look at those countries, those frontier markets or countries, they have their own unique situations. There is no one-size-fits-all solutions to follow. So, and third point is from Chinese experiences, we believe in our past development, we gained some very important insights and lessons. For example, how could we focus more on environmental protection in the process of development? How could we achieve the more inclusive and equitable growth to minimize the income gap between the rich and the poor? So, China's Exim Bank, as an official window for foreign aid in China, we are always working to provide foreign aid services to different countries and regions. So, we're working hard to expand our services. Of course, we're faced always with risks, but in the long run, our judgment is no risk, no returns. We should collaborate together. Risk can be managed, can be minimized. We can through all kinds of innovation of products, services of financial structuring to provide tailor-made products and services to those countries and provide better financial services to promote mutual development. Thank you. Getting the balance, getting from growth and transformation, but also getting the social balance, environmental balance. First of all, when you look across the universe of emerging markets, who's actually doing it right and who has the biggest problems? Oh, that's a tough one. I think something that perhaps it was Khalidou said, that there is a sense in which there is a growth rate that might be too fast. I think that's something that has not been explored enough in the policy space. By not explored enough, what I mean by that is we always celebrate a higher GDP growth rate as being intrinsically better without accounting for the full environmental cost, if you will, if you use the term environmental in a very liberal sense to include all sorts of societal costs. Khalidou, I think, was speaking about cost imposed in the fabric of society, which is an even more abstract notion of cost. But even if we can find ourselves to carbon price, for instance, or various kinds of carbon footprint type issues, those are costs that certainly are not factored into most GDP calculations. There is a stream of work pushed by some World Bank economists and even some philosophers, including one of my teachers, Amartya Sen, at Harvard, where they compute this human development index, which is an alternative characterization of the development of societies. And those HDI, so-called HDI rankings are often quite different from GDP rankings. The U.S., for instance, shrinks pretty far away from the top when you begin to look at its ranking in terms of human development index, so to speak. So I think my answer would be that depending on what aspect of progress a particular society chooses to prioritize, you would get very different answers for what's an appropriate GDP growth rate. For my own taste, you know, anything south of, for these sorts of markets, anything south of 7 is probably too low, but anything north of 10 is probably imposing some dramatic cost on everybody else. But I'm sure we'd get different views from across the table. Other people have views on this, so I... I agree totally on the numbers, but one of the interesting discussions that I've had in the last few days was with a friend of mine who works for a bank, and his bank ran the numbers on their most successful companies that they've invested in. He runs an investment bank. And the average long-term growth rate was 2.3 percent. Now, I don't know anyone in this room or any other room would invest in a company if they told you its growth was going to be at 2.3 percent for the next years. So it's an interesting discussion. I don't know where one would start looking at it. And I think it comes back down to one of the themes of this year's event that, you know, we've heard said again and again, but quality growth versus just growth. And that does take into account then environment, the abstract ideas, and it means the numbers can be looked at where 2.3 percent, whatever it may be, may not be such a bad number when you look at some of the other features around it. In Vietnam, is this an issue of debate? Do people debate how they have healthy growth and to deal with the environmental and social effects of growth, or are you concentrating on growth at the moment? In Vietnam, it's our own. We're not only paying attention about growth. We are now paying a lot of attention about our social problem for sustainable growth of the country. And the last time I'll start to pay more attention about the environment issues which related to the economy growth. And Vietnam is not alone in that. We are as a member of ASEAN, you know, together with the other member countries of ASEAN, we have a policy of sustainable growth in the regions. Do you have a comment on that? Well, yes, I agree with the panel. But when you look at my country, Azerbaijan, it used to be the fastest growing economy in the world. And like three, maybe four years ago, GDP growth was about 35% per annum. Is it good or bad? Actually, it depends on how do you use it. The main point of our growth was oil and gas. And the question is how do you use this growth just in terms of oil and gas benefiting from oil and gas? And how do you use it to develop the rest of the country? I mean, the non-oil sector. How do you deal with the environment and other issues? I think it's very important. In the example of Azerbaijan, despite of the fact that we are originally oil and gas rich countries, but our government pays a lot of attention for renewables for the alternative sources of energy. I'd now like to start to tap into the wisdom in the audience and to get questions from the audience for our panel. People have mics around, so please raise your hand. Yes, first question there on the left hand side. Hi. I'm Pranay Garwala. I represent a fast growing company in India. This question relating to the countries that are more resource rich, leaving the resource and real estate in these countries, what are the other sectors you think we should be looking to invest to get returns? We'd like to take that one. Khalid, yes. Well, as far as Saudi Arabia, education, healthcare, those are both required. I think Saudi Arabia is an interesting case because if you look at last year's budget, which was our largest budget in history, about $190 billion-ish, 50% of that went into education, healthcare, human resource development. That's a huge amount being plowed into that economy by government. That in itself is an incredible opportunity if anyone wants to invest in various markets in somewhere like Saudi and bear in mind all of the ancillary markets that would develop from this, whether it's in IT, whether it's in service-based industries. Our growth in Saudis is literally based on necessity. If we don't grow, if we don't build various industries, we'll die in wither. I mean, the population of Riyadh in 1950 was 50,000 families. Today it's over 6 million people. That country is not built to sustain that kind of population. We have no water, very basic. So oil is our water, and if we don't develop everything else, then we have no life without water. So what I would say, if you're looking to invest almost anything can grow. Apart from agriculture, I wouldn't recommend investing in agriculture. I would add agriculture for sure. We have 9 out of 12 climatic zones in one country. And with very good traditions in agriculture, in growing cotton, tobacco, and wheat. So I think one of the, just to invest in agriculture. Other questions? Yes, in the front row? Can we get a mic to the front row please? I just heard, my name is Kumar from a company called Sutherland. One of the things that I didn't hear the panel across, everybody talk about is about talent, about people. You may have resources, or you may need, or you may have opportunities. You may have, of course, challenges about visas and immigration in some countries. You may want to have the right balance in terms of the domestic people to whom you want to bring on board from across other places. But between what's happening in India of people being there, but of course not hireable, and maybe a lot of opportunity to train people, to people of course available again in China, but maybe more for manufacturing and not services on the other hand. And the push for services, but of course can people be available to places like Saudi Arabia where we're talking about education and training. But the point here is of course, what is the kind of employment opportunity, what kind of training, where is it that we can actually play and bring the right kind of balance across all these different people. I think it's a great and important question. We'd like to start first. The question about talent. So China is developing very quickly, and we have realized that it takes time for us to nurture a new generation of talents and develop education. We have realized that education is the most important engine for development. So Chinese experience have already showed that talents and skilled workers are very important in the construction of roads and highways and so on. So when the workers are trained and when they get experience in the construction sites in China, so they can bring, they can take their experience to other countries when they go overseas. So we find that it's very important for us to have technology transfer and it's also important for us to have the talent transfer. We, I think that in the frontier countries, I think this is a very good experience for them, borrow, they need to nurture the new generation of talents. And as a potential failure point. So I think that was an excellent, excellent question. You know, one way of looking at this is that in a large country like India, almost depending on how uncharted we want to be, 400 to 500 million people are just completely locked out of the mainstream economy. And this is the ultimate emerging market within the emerging market in the sense that the supply of talent at one level is so enormous. And the demand is also there because you always find corporations complaining about attrition and lack of hireable workers and so on. But you have no shortage of intrinsic talent. It's just the matching process. The market for talent is not working. So it's the ultimate expression of an emerging market within an emerging market. And to go to the previous question, which is what are the investment opportunities, whether in resource rich countries or not, I think talent is the ultimate investment opportunity, whether in Saudi Arabia or in China or in India. If you can get this allocation of talent within the country to be done even marginally better, I'd wager that that goes straight to the bottom line in terms of countries' improvement and prospects. So this is probably the most important economic issue as well as the most important humanitarian issue at some level for the development of a country. Any other comments on this? Can I just say in Saudi Arabia, which was obviously specifically referred to, I agree with you, it's a very big issue, providing talent into the country. Local talent is a big issue. Under our holding companies, we run five separate companies that are in different industries. And I can tell you, it's very difficult to get talent locally and from abroad. But we have an issue is that the labour force in Saudi Arabia is between 7 and 8 million people. 80% of that is foreign. Just under 90% of the Saudi labour force works in government. So there are very few Saudis in the private sector. And it's the biggest issue we face. It's not dissimilar to many countries that try to nurture an industry by blocking out the competitors. At some stage you have to, otherwise you'll drown out your own country. You'll drown out your own people. You won't give them the opportunity. We have 10% male unemployment in Saudi Arabia, which is actually also missing a big issue. I'm not sure how much female unemployment we have in Saudi Arabia, which is a cost to the country. 40% of people between 15 and 26 are unemployed. That's another scary number. But we have 6.5 million foreign workers. To me that says we don't have a jobs issue, we have a talent issue. And sometimes we need to bite the bullet and say, look, we're going to have to hold back our private industry. We're going to have to hold back growth so that we can nurture this talent. And there's number one lessons to learn from India, China, Russia, et cetera, particularly India and China. I think they've done a phenomenal job of fostering talent in the last 40 years. David? Thank you. Thanks. I'm David Michael at VCG. The principal in Salton talked about winning the lottery. And I think a lot of small emerging countries have been winning the lottery lately with commodity prices booming. And so many of these countries are maybe taking a double bet with their economic development. They're betting on high commodity prices. They're also betting on the continued strength of China, which is driving a lot of the commodity exports. And it highlights the more general question of how do you decide as your economies develop where you benefit from China versus where you compete and what kind of balanced economic development you pursue. So I wonder, gentlemen from different markets might comment upon how they manage that balance and how they decide where to compete with versus benefit from China and how to balance different sectors of their economies. That's a great question. How do you compete with Vietnam? How do you compete with China? How do you cooperate with China? Vietnam and China has a long history of cooperation. Our development today is a fruit of that long cooperation. So now we not only all cooperate with China. We really compete with China. And what is our point of view of competing with China? We are trying to avoid the strength of the Chinese market. It's what it's cheap labor forces with a cheap product. And to avoid that, Vietnam has a policy to invest more and to attract more investment in the more high quality product. So I think maybe for clear, I might take an example, but the textile apparel. Vietnam and China is the two biggest exporter of that product. But Vietnam concentrated in the medium quality product and was quite successful last time in that product. And the China factor for Azerbaijan? Actually, maybe it is crazy just to compete with China, but to cooperate with China, of course, and actually I wouldn't be mistaken if I say that many goods, let's say, to Azerbaijan, to this part of the world come from China, produced in China, manufactured in China. And at the same time, how can we benefit from cooperating with China? I think just exporting our goods and products to China. And just recently we had, I just mentioned agriculture and maybe from China's scale, it is not a big volume, but for us, for such countries as Azerbaijan, the same expert in tobacco, which is actually, Azerbaijan started to produce to China, it would be of our big benefit. The bank must be financing a lot of Chinese companies going on that commodities hunt as well. I believe actually different countries, they all have their own different advantages. So that's what we call comparative advantages. So if we have a similar industrial structure, for example, if we all have the advantages in low quality of cheap products or cheap labor, what should we do? For example, in the past, we actually, we have already witnessed some fierce competition in terms of the labor fight. For example, in Europe, you have all the holidays and weekends, restaurants will close, will be closed during the weekends, but in China, we're open. This is a cultural differences. However, once you reach the certain development stage, you will find your appropriate way or development approach. For example, in today's China, we already realized that coastal cities have to transfer certain manufacturing base or certain sectors into inland cities. So now we realize that our top priority should be how could we tap on our development experiences to transfer those development knowledge, development approach and to provide training to the labor, local laborers in other countries if local residents cannot benefit, that will not be sustained. So we need a cooperation. I want to twist this question to something that I think is perhaps even a bit more interesting, which is when a country does win a lottery, like a commodity boom. The question is what does it do with that money? Chile, for instance, has created this very nice, I think it's Velasco's finance minister, maybe he's one of the engineers of this, created a very nice stabilization fund where part of the boom money automatically goes into a fund that's used for, the feast is used to prepare for the famine that inevitably will show up eventually. That I think is just a very profound thing because it's a way of restraining the current generation from excess for the benefit of the future generation and most countries are not able to do it. Khalid was talking about earlier about having won the lottery with the oil gusher and experiencing extraordinary difficulty in the kingdom with developing all sorts of other industries and that's true not just of Saudi but of all many of the oil rich countries or many of the resource rich countries in Africa they've not been able to take the lottery money and convert it into infrastructure that can then generate new industries which ultimately will of course be a much more robust base. I think when these lotteries arise, I guess the question for all of us is what can one do to channel those funds into productive, longer term institutional development which by and large does not seem to happen which is why I think the few experiments that do exist on this are extraordinarily useful to look at and study. Just a quick point about some of the resource rich countries and some of the difficulty they've gone through and this lottery issue is we're looking to develop and catch up to China and India but we behave like America and Japan as a nation inside the nation and this is one of the fundamental difficulties we have in taking things forward it's why we have 80% of our labour force foreign. We have plenty of people to build roads that are Saudi they just don't want to do it and this is the major challenge for the resource rich countries particularly when it's based on one research we're not talking about Brazil which has a number of things to choose from so the generation in Saudi Arabia and many of the Gulf states that grew up in genuine poverty is almost long gone those of us who have been born now who talk about it in a nostalgic way don't know anything about it and I think this is the danger. Thank you. Is it on the side please? Yeah this is a question for Mr. Sultan my name is Udayishi from India Saudi economy is I believe over dependent on two products basically oil and gas so the economy is dependent on oil prices at $100 the economy is at different stage and at $40 it will be at a different stage so that is one of the vulnerability of the resources which are having Middle Eastern country number one and the number two issue would be as and when the resources starts getting depleted how are we going to cope up with the situation on the economy, on the growth, on the people I think this is going to be the biggest challenge for countries like Saudi or Kuwait or Middle Eastern country Thank you. You're absolutely right I don't know whether it would be optimistic or pessimistic I rather believe that oil has become less of an issue before it runs out and I think technologies will develop before the oil runs out long before some of the numbers one hears about the reserves I think are overstated by some and understated by others the truth is usually somewhere in the middle but if oil ran out tomorrow or wasn't important tomorrow I can tell you Saudi Arabia would be in a very serious issue as would most of the Gulf States we're nowhere near where we need to be in terms of not just the economy but it is the development of the people socially etc people always talk about political change in the Middle East etc we're nowhere near ready for political change and the reason we're not ready for political change is because we don't have a sustainable economy that can live through the rigors of a more open society now I know some people won't like the way that sounds but you need to direct a country that has the situation that it's in today it can't be left rudderless essentially for periods of time when there's squabbling going on now there are a lot of negatives with that that are associated with not having an opposition party but it's a much more open consensus based system than one thinks and I think China is a great example of where a directed growth benefited the country significantly Singapore is another great example countries that have a lot of hard work need someone to lead the country not someone to follow where the country is going particularly when the country is not going anywhere thank you when I think about the question of beyond bricks it seems to me that one of the biggest growth vectors that you could have is to trade amongst each other and that trades what people talk about South-South trading and so on and yet the numbers are still staggeringly low I mean actually the orientation of financial institutions towards the west you just keep hearing about Chinese banks wanting to go to Europe or the states and the similar case in many different industries what is holding it back or is there a fundamental reason why Azerbaijan isn't selling tobacco to Vietnam and Vietnam isn't selling to Saudi Arabia and much bigger numbers great question why don't we start with Vice President Liu will you be the experience of the ADB and also in the import expert bank might be very useful here I think the key issue here is first of all if you look at the big picture in terms of the historical development when we talk about the trade development and investment development it all happens among the major economies no matter it's about G7 or break countries if we look at about ten years ago China's trade volume was very small much smaller than what we have today so we need time we need to develop a market secondly, currently South collaboration they have their own challenges we need some breakthroughs here for example in China we had some experiences here when we need foreign investment when we need to grant some benefits to foreign investors we had a huge national debate on that so in order to gain development you have to pay first no pay no gain for example in those frontier markets I believe you also have those kind of policy debates how could you open up your market and this is a very complex task so I think real terms collaboration is the key to solve those challenges it's a very good point and the last few days being here I can't tell you the amount of people who have come up and said why aren't you investing in China and why isn't China investing in Saudi there is investment that goes back and forth but if it makes you feel any better of it if it's again more optimistic when I leave here I'm next week meeting with a bunch of people to figure out ways to do this outside of the manic pace of somewhere like the World Economic Forum and there are significant barriers to entry on both sides, on all sides from Saudi Arabia you know it's there's an image issue the perception of Saudi Arabia the security of one's investment in a country like Saudi Arabia and when I say an image these are not real there is some very significant there are some very significant real issues which are regulatory and legal it's very easy for Saudis to keep their money in Saudi not so easy for foreigners people don't know what will happen how do they arbitrate arguments even doesn't even need to go into serious legal issues we have no real mechanism to receive a lot of investment even though I think Saudi Arabia ranks somewhere around 15 on the largest recipient of foreign direct investment obviously it's channeled into very obvious areas in the oil and gas industry I would love to see ties built based on investment it was a policy that His Majesty King Abdullah in 2005 tried to encourage I know because I was one of the I worked in the Foreign Office at the time when they were trying to push it build ties together not just invest in each other's countries I think it's the best thing the developing world more united is much better than developing world competing against each other Thanks, Professor Khanna so I would I'd push back a little on that characterization actually because I think it's a little bit of whether you see a glass as half full or half empty the ratio of any south-south statistic to total inter-country statistic has risen a fair amount in the last 10 years it's small it's maybe 10% or 15% of the total volume of any cross-border trade but it's not 1% or 2% that it used to be or to put it in a more practical way when I was a student 20 years ago it would be I teach at the Harvard Business School and it would be almost impossible for one of our instructors to tell us that you could build a company from zero to a billion dollars without going to New York or London it would just not be possible and today if not routine it's certainly not uncommon I can think of any number of companies sitting here that are built between San Paolo and Beijing Kuala Lumpur and Picker Southeast Picker Johannesburg Bombay and Abu Dhabi there are billion dollar companies that didn't exist two years ago, three years ago and nobody ever went to London or New York and that's a south-south transaction if ever there was one it would be a lot more of that so I think the question is a fantastic one but I just don't know I would prefer to see that glass is half full than half empty Thank you all very much I'm afraid we're going to have to leave it there we have learned that the frontier is a rough place but also a place with many opportunities please join me in thanking the panel