Australia is the New Asia

As the world continues to shrink with globalization, international real estate investment is becoming more popular than ever before. Improved communications, reduced transactional friction and investment-friendly policies are drawing Asian investment to the U.S. market in record numbers. However, there’s also been intense activity in Australian real estate, particularly from Asian investors.

MI.Australia082015 conducted a survey at the end of 2015, which showed that Australia was the first choice of investment location for international property buyers based in Singapore and Malaysia, second for Indonesian investors.

Experts suggest that these investors see Australian properties as a better investment than real estate in other countries. It is often relatively cheap, given currency fluctuations. The Australian dollar has fallen by about 30% in the last few years.

Asian investors are “looking at larger towns like Newcastle and Wollongong. Larger established towns (with) universities in place and also potential for growth from a commercial side of things.”

There’s been a high level of investment from China as well. The Wall Street Journal recently reported that Chinese investment in Australian real estate has doubled in the past year. This segment accounts for 16% of the total sales of Australian real estate. In fact, China invests 3 times the amount in Australian real estate that the U.S. does, and 6 times what Singapore invests. Prior to 2013, the U.S. was the leading investor in Australian property. China is extremely important to the Australian economy. It is Australia’s largest export destination and also contributes to that country’s growing international tourism.

This is partly fueled by uncertainty surrounding the Chinese economy. Favorable trade agreements and a growing Chinese middle class also encourage the flow of investment to the Australian market. High net worth individuals in China find the Australian market attractive, both in terms of price and economic stability.

Actions by the Australian government at the end of 2015 also put a bit of a damper on foreign real estate investors. The government cracked down on property owners who had not gotten the required approval for their investments. It also instated a new fee for international investors registering their Australian properties. Rules governing newly built properties are less restrictive, and this has led to record participation from foreign investors in development projects.

The international impact is being felt mostly in the residential market, in part due to the small size of the commercial market, which is dominated by domestic investors. However, foreign money is stillgoing into commercial properties as well as development plans. Overall, in the past year, 50% of Australian real estate investment capital came from foreign investors, according toAustralia’s Foreign Investment Review Board.

I can see this high level of foreign interest will have an impact on all sectors of the Australian market. Demand is expected to grow in hotels and resorts and even in the rural land market. It’s likely that this trend in high demand will continue.

Developed & Emerging Markets – Where Do They Stand?

Ever since the term, BRIC (Brazil, Russia, India & China) was created in 2002 by Goldman Sachs, the story of global growth has been emerging markets. Russia was driven by oil and Brazil by commodities, China and India were driven by demographic dividends in their immense populations. However, things have changed in the past three years.


In 2008, the Lehman crisis put the developed markets in a precarious condition. Debt soared, liquidity tightened, growth collapsed and the global GDP trend shifted out of the developed markets and into the emerging markets. As the share of emerging markets started rising, the share of developed markets started falling. In 2009, emerging markets accounted for 35% of global GDP, while developed markets accounts for 42%. In 2013, emerging markets accounted for 48% and developed markets accounted for 32%.

While the U.S. grappled with low inflation and the EU was occupied with the problem in Greece, things took a sharp shift in favor of developed markets. There was clearly a lot of pressure on emerging markets. As liquidity dried up in U.S. markets, commodity producers suffered. The oil and commodity slowdown just made it all worse. In 2015, the share of emerging markets in the global GDP was down to 34%, but the share of developed markets finally increased to 43%.

I think that this trend is going to become more pronounced in favor of developed markets in 2016. India, China and Mexico will still be the fastest growing economies. However, other emerging markets are going to pay a price for the fall in China’s growth. The US, Canada, UK, Japan and Germany will most likely grow by 2%.

As the US creates record jobs, the EU gets growth back, Russia and Brazil will probably suffer from the weak commodity prices and bad policy decisions. That means that between the slowing of China and negative growth from Brazil and Russia, the emerging markets are going to have a rough year. 2016 may be the year that developed markets get back on track.

What do you predict will happen?

The Value of Education

There is an on-going debate over whether college is worth the investment. Does it really equal the size of a certain paycheck? The real issue is that a college degree is one of the greatest, if not the greatest determining factor in social mobility.

"Education" Button on Modern Computer Keyboard.

Education has accelerated in the 20th century and social mobility has climbed along with it. College education has driven economic success and social changes in the 1960’s and 70’s as well as producing technological marvels at an astounding pace.

Today, research universities have changed the type of people that they are producing for the workforce. Now, we are creating entirely new industries with these new ideas and technologies. Graduates enter the economy with a different type of knowledge to drive scientific discovery, technological invention and understand the fields that will guide us forward. With these cutting-edge ideas, products and processes, creativity and discovery are normal in our marketplace. This is not only boosting graduate’s personal success, but also the competitiveness to succeed at innovation.

If you take a broader look at the issue with your economics cap on, the post-industrial economy grew from a large group of college-educated thinkers and dreamers. The $18 trillion economy in the United States is not a result of improvements on the worlds of the past. This is the complete result of highly creative technology developments that alter who we are as species. We utilize biotechnology, nanotechnology and communications technology to produce unprecedented economic and social change.

Educational attainment drives class structure, medical outcomes, social welfare outcomes, children’s success and democratic participation. The education level is really even a predictor of life span. The benefits of higher education are incredibly larger for the economic win rather than the individual. Educational attainment has drastically changed how the world works, lives, mobilizes, communicates and survives.

The executive, pilot and surgeon have tools that they rely on and staff that they work with – all products of higher education. Not to mention that they rely on college graduates to manage their retirement funds, serve as pediatricians to their kids, inspect the food they eat and clean the water that they drink.

What do you think about college education? How necessary is it? What changes need to be made? There are countless arguments that can be stemmed from this topic so please tell me, which arguments matter most to you and your future?

The Chinese Economy Will Turn Around

The Chinese economy has had an incredibly difficult year. Between the dramatic sell-off in the Shanghai stock exchange and their weakening GDP numbers, it has just been a constant flow of bad news from China. There has also been some negative statistics that are fueling concerns that China’s legendary success of pushing over 300 million people out of poverty over the last 30 years is coming to an end.

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Besides economic troubles, China has also been facing pollution and other environmental challenges. A World Bank Study actually states that only 1 percent of China’s 560 million city dwellers breathe safe air. There is also a looming property bubble and the fact that their country de-prioritizes democratic principles, but let’s keep the focus of this to economics.

By some estimates, China’s GDP growth rates are hovering below the minimum 7 percent per annum that is required to double per capital incomes in one generation. However, there are factors that suggest a rebound is about to occur. Public policymakers are planning to further cut interest rates, encourage bank lending by reducing the reserve requirement and increase public investment.

China is managing the three main drivers of growth – capital, labor and productivity in a way that supports long-term prospects. The relaxing of the one child policy back in October was quite a surprise. It was originally introduced in 1979 to slow the population growth rate – it is estimated to have prevented around 400 million births. Now, 90 million couples are eligible to have two children.

The country also has plans to increase the number of cities with a population of 1 million from around 10 today to 221, as well as the cities with 10 million people from 5 to 8 by 2025. A more urban population is the key piece of their strategy to move from an investment led, export based economy toward a consumption based urbanized growth. This will help the Chinese avoid a middle-income trap.

A lot is at stake. Over the past few decades, China has become a major and main trading partner and source of foreign direct investment for developed and developing countries. They are the largest foreign lender to the U.S. government and the biggest source of foreign direct investment to Australia, as well as the largest trading partner and source of infrastructure for emerging countries such as Brazil and South Africa.

Needless to say, China has an enormous vested interest in avoiding an economic slump.

Climate Aid…or Not?

One of the big words this week in Paris is “climate aid.” There is a big push from climate focused NGOs to convince rich countries to spend quite a fortune to help poor countries adjust to global warming. This catch-all term includes money given for global warming education, solar panels, adaptation and anything else that can be linked to global warming.


There have already been results, too. The Organization for Economic Cooperation and Development has taken a look at 70% of the total global development aid. They found that about one quarter of that money goes towards climate-related aid.

This week, Australia’s Prime Minister, Malcolm Turnbull pledged to divert $1 billion of Australian development aid to climate aid. In October, Jim Yong Kim, the World Bank President pledged a one third increase in the bank’s direct climate related financing. This will bring the bank’s annual total to an estimated $29 billion by 2020. A month earlier, the Chinese President, Xi Jinping pledged to match President Obama’s pledge of $3 billion in aid to the United Nation’s Green Climate Fund. The United Kingdom is using $8.0 billion of it’s overseas aid budget for climate-related aid over the next five years. France is promising $5.6 billion annually by 2020, which is an increase from $3.4 billion today.

The goal is for all of their pledges to add up to $100 billion a year. This was decided at the Copenhagen climate summit six years ago. Even though Rachel Kyte, the World Bank vice president told the Guardian newspaper that this figure “was picked out of the air at Copenhagen.” However, this arbitrary goal has become fundamental to all. The only problem is that the climate aid money isn’t new. It is being drawn from existing aid and development funds. Public health, education and economic development are being sacrificed.

During an online survey by the United Nations, eight million people ranked what matters most to them. “Action taken on climate change” came in last place. The question that we have to ask is if this is aid or self indulgence. Green energy sources would be good to keep on a light or charge a cell phone, but they are useless for tackling the main challenge’s that the world’s poor face.

I believe that investing directly in agricultural research and better farming technologies would help the world’s poor much, much better than solar panels would. What do you think?

The U.K. Devolution & The U.S.

It has been a disappointing primary season for the United States. Candidates in both campaigns have not discussed the ways that the federal government will empower cities – the engines of economic growth and social progress.

Without tackling this difficult challenge, the cities will have to face things on their own – including taking on even more responsibilities if the longer-term budgetary trends continue. Growth in mandatory spending like Medicare and Social Security has crowded out federal contributions to housing, infrastructure, development in infrastructure and more. This will become even more dramatic ad the elderly population continues to grow.

BIRMINGHAM, ENGLAND - OCTOBER 04:  Chancellor of the Exchequer George Osborne speaks to delegates at the Conservative Party Conference on October 4, 2010 in Birmingham, England. On the second day of the conference the Chancellor announced cuts to welfare payments.  (Photo by Peter Macdiarmid/Getty Images)

The stunning contrast is in the United Kingdom, where there is a conversation about the devolution of central government power. In the past few years, this devolution has gone from a goal to a part of the national agenda. George Osborne, Chancellor of the Exchequer has been the leader of these “city deals” which creates opportunities for metro areas in Britain to negotiate for greater powers and discretion to strike detailed devolution agreements. In Britain’s election season, the Conservative and Labour parties unveiled competing proposals for how to decentralize power.

Just a few weeks ago, while delivering a speech to the Conservative Party conference Osborne introduced a few new approaches to advance the devolution agenda that are quite bold.

  • The establishment of an independent infrastructure commission

“If we’re going to build, then we have to shake Britain out of its inertia on the projects that matter most. There’s an idea, put forward by many people, including some Labour politicians, and its time has come. An independent National Infrastructure Commission. A commission, set up in law, free from party arguments, which works out calmly and dispassionately what the country needs to build for its future and holds any government’s feet to the fire if it fails to deliver.”

  • Establishing a power balance that reflects the nation’s strengths

“In the end it all comes down to where the power lies. To who makes the decisions … It’s time to face facts. The way this country is run is broken. People feel remote from decisions that affect them. Initiative is suffocated. Our cities held back. There’s no incentive to promote local enterprise.”

  • Allowing local areas to collect their business tax receipts

Today I am embarking on the biggest transfer of power to our local government in living memory. We’re going to allow local government to keep the rates they collect from business. That’s right, all £26 billion of business rates will be kept by councils instead of being sent up to Whitehall. Right now, we collect much more in business rates than we give back in the main grant. So we will phase out this local government grant altogether.”

  • Termination the uniform business tax rate in favor of allowing local areas to determine their own rates

Yes, further savings to be made in local government, but radical reform too. So an end to the uniform business rate. Money raised locally, spent locally. Every council able to cut business taxes. Every mayor able to build for their city’s future. A new way to govern our country. Power to the people. Let the devolution revolution begin.”

In some ways, the momentum of devolution in Britain would only happen in a matter of time after being one of the most centralized countries of the OECD nations and having an outrageously outdated balance of power.

So where is it in the United States? It is true that power is already much more decentralized in America, but there has been so little debate over how to make this devolution of power, making it a testament to the shallowness of the current political debates.

Disruption in Indian Banking

download (3)Five weeks after Kolkata-based Bandhan Bank Ltd began operation, IDFC Bank quietly launched in Mumbai. Previously, the banks fought it out with two dozen contenders to get the Reserve Bank of India’s in-principle approval a little over a year ago. This is besides the fact that the bosses of both the new banks, Chandra Shekhar Ghosh of Bandhan Bank and Rajiv Lall of IDFC Bank are not bankers, they are running their banks more differently than you can imagine.

Bandhan Bank began operating with 2,022 doorstep service centers with 501 branches and 25 ATMs all across India. One-third of their branches are in rural areas and unbanked pockets. However, in the past few weeks, it has increased its branch network and substantially increased their customer base. Bandhan plans on continuing to serve this segment of the market and add small to medium entrepreneurs to its loan portfolio. They don’t want to dabble in corporate loans for now, but will collect deposits from all, including high net worth individuals and corporations.

In contrast, the IDFC bank is aiming to be a smart corporate bank. It began with 23 banks including eight in Mumbai, New Delhi, Bengaluru, Kolkata, Chennai, Ahmedabad and Pune offering corporate and wholesale banking products. The remaining 15 branches are in unserved areas. IDFC’s focus is using state of the art technology to make transactions easier.

There is a new wave of competition in Indian banking and it will continue to intensify. In the past 20 years, 12 new banks have been created, but not all of them have survived. Just in the past seven weeks, two more banks have appeared. In the next year, we can expect to see many more. Both banks are challenging the high street banks to redraw their strategies. They have to take note of Lall’s passion for technology. Some banks have already made big moves into rural India to fight Bandhan’s expansion.

The story doesn’t just end here. More than four foreign banks have approached RBI for local incorporation. Once they incorporate, they can open more branches and buy out weaker banks. RBI could also allow for some strong urban banks to convert themselves into commercial banks. Most importantly, banking licenses for universal banks and specialized entities should be in healthy supply.

Get ready to see huge disruptions in Asia’s third largest economy consisting of Rs.90 trillion. Let’s sit back and watch small banks fight pitched battles with big banks for locations and local incorporate banks lure depositors. Sophisticated corporate and personal banking products are coming to India.

3 Reasons Why You Should Invest In Africa

“We are enjoying in Africa what I call the democracy dividend. The progress we are seeing, economic development are all part of the dividend of good governance, respect for human rights, rule of law. It has created an enabling environment that allows not only foreigners to come in and invest but for Ghanaians to invest. It has created an atmosphere for our young people to be creative, innovative…” – President John Mahama, Ghana


China used to be where the big money was – low cost workers and huge factories were plentiful. Now, with the Chinese downturn there are new reconsiderations for future investments. One of them is the prospect of Africa. If you have not seen all of the signals that this is the new continent to invest in, here they are.

  1. Africa is growing fast

The World Bank released a report that 6 of the 12 fastest growing countries in the entire world are located in Sub-Saharan Africa. Half of the world’s population growth will be in Africa.

Africa has sure had its fair share of problems from physical geography (landlocked countries will disease-susceptible tropical climates) to manmade challenges such as corruption. However, when you view Africa as a long-term investment, the combination of demography and development make Africa a promising buy.

  1. China is already in Africa

For the past decade, China’s investments in infrastructure like mines, farms, roads, ports and railways have been the big story. However, they have also invested in energy to increase Africa’s raw materials like food, oil, diamonds and uranium.

Now, Africa is both a partner and rival to Chinese manufacturing of clothes, toys and electronics. Yes, right now Africans have to wait and see how much they will be affected by China’s economic slowdown. Most of the attention is focused on low commodity prices and possibly damaging capital flight.

  1. Western countries are absent

In ways of both governmental aid and private investment, the United States and European countries have been pretty minimal. Right now, western governments are cash strapped and have turned from public sector aid to more private sector investment as their global developmental strategy. However, this has not been working out well because the private sector is often deterred by the high risks involved in investing in Africa.

So, when you put these three factors altogether, it does look like the perfect time for American businesses to consider Africa for long-term growth possibilities. In the next 100 years, the consuming middle class African will be a huge driver of economic activity.

In major cities in big countries, the middle class demand is already very real. With better infrastructure, more efficiency, less corruption and more urbanization, investing in Africa will become the new source of wealth.

The Banking Revolution Is Coming

Today, almost all retail banks have their own applications for smart phones. However, I believe that digital banking will continue beyond that. We can already see similar trends in other industries. These opportunities can help support branch productivity, customer analytics and much more.

Your Phone = Your Wallet

Soon enough, you will not have debit and credit cards in your wallet. We already tap to pay with NFC chips in Android phones – for the past two years. By the end of this year, Android b ank apps should let us tap and pay too. The early adopters are already putting it to use in Australia and New Zealand. Of course, Apple is on it too. Apple Pay consists of tapping your phone and then swiping your fingerprint to authenticate. However, this
aspect also makes Apple a competitor of banks.

This is just the beginning too. Businesses will release their own apps that let you ‘store’ your information in your phone and then tap to pay just like the Google wallet. The pre-paid card industry will switch to virtual cards. Italy and South America, the leaders of pre-paid will lead the way for us.

Now, let’s think beyond tapping. What about adopting collecting points or spotting matching visuals? There are experiments going on that will have apps reward users with points when they explore new services and even unlock in-app levels. This will encourage regular engagement, driving down the need for branch based banking with is a huge cost.

Banks will have to go beyond just retail banking. Something that I am personally looking forward to are international money trG-WALLETansfers. Western Union and Money gram currently dominate this global industry. However, there are online players such as Xendpay, Xoom and Transfer Wise. By adding this to their banking app, they can acquire new customers with a targeted money transfer app. P2P transfers, bill payments, share trading, pension management and more are some other options as well.

Something else that will easily come are location or activity based services and offers. Think about being at home, logged into your bank account and you’ve paid a few pills. Next thing you know, you’re offered to face time with a relationship management or have an online financial health check.

Most of what I presented is not new. Banks are smart and they are looking at other industries like retail, gambling, gaming, news and entertainment and realizing that they should be doing the same things. This is only the beginning – our banks are revolutionizing themselves.

How To Connect More Users

Even though mobile phones are almost global, only about 12 percent of people in emerging economies have data connection. What is even more surprising is that 4.3 billion people still do not have access to the Internet.

These unconnected people are living in countries that have underdeveloped economies with digital infrastructure that is lacking as well. However, there is huge growth potential if there could only be connectivity. I believe that with the right ICT and strong policies that are in support of innovation and fair competition, these countries can connect their people to the rest of the word and narrow the digital divide.

download (2)Most importantly, a broadband infrastructure with wider coverage and faster speeds must be developed. These countries need to see that broadband is the critical foundation of national infrastructure that will only increase economic growth and raise the standard of living.

One way that the infrastructure could be built is by Public-Private Partnerships (PPPs). Malaysia has already done this – regulators created a framework that ensured competition with equal access. The result? The cost of digital entry for citizens was decreased, fostering innovation and competition among service providers – very successful, in my opinion.

While these networks are being launched, telecom operators need to keep costs low. They could do this by sharing optical fiber and infrastructure with power and utility companies. When you take a look at the deployment cost, burying the fiber optic cables and conduits underground is usually 40 percent, but can be up to 70 percent of the total cost. These high costs make the Internet access more expensive to its end users.

There should also be new mechanisms for allocating radio spectrum that can increase supply while also reducing the cost. This is actually a very important issue because most of these countries will have to increase their available spectrum (the basis for high-speed mobile broadband) from 50 to 100 percent over the next five years.


Something else that would help are the development of more applications to aid their lifestyle. Apps are what drive the demand for connectivity and create new business models. M-KOPA for example, allows Kenyan households with no electricity to purchase their very own solar power system and make daily micro-payments. If the government can create a level playing field that lets entrepreneurs to devise new solutions without having to worry about monopolistic competitors or too much regulation, there could be great benefits to local users.

It will take governments, operators, technology providers and application developers, but we can connect everyone in the world and we will.