Looking toward the future: Capturing growth opportunities in BC Business Council of British Columbia Dominic Barton Global Managing Director, McKinsey & Company May 28, 2013 McKinsey & Company |
Seven priorities for BC to pursue Gateway economy – Increase share of Asian trade from 5% to 10+% of NA total with Prince Rupert expansion. Build up broader economy with regional HQs of 1 Asian companies, Asia-focused professional services (e.g., law, accounting), and transport services LNG – Accelerate development of export capacity to Asia (from 6 Mtpa to at 2 least 18 Mtpa by 2018) before new US and Australian sources come online Natural resources (e.g., forestry, coal, copper) – Invest in critical areas to ensure 3 BC at least maintains share as Asia grows , despite recovery in US exports Agrifood – Develop global champions in high-demand protein crops (e.g., beef, seafood, dairy) and processed food to establish BC as net food exporter . 4 Emphasize brand – food safety, quality, and luxury items Education – Establish as top 3 export industry (from 4% to 9% of total exports). Convert at least 60% of language and vocational students to university/college 5 students Tourism – Establish BC as top 3 Western destination for Chinese tourists (70% increase to 375k visits per year). Simplify visa requirement (i.e., faster, less 6 costly, and less complex) for short stays from target markets Direct engagement – Create cabinet-level position on Asia to signal focus, 7 establish business exchange programs, and convene a tri-sector task force on Asia McKinsey & Company | 1
Overview 1 Five global trends Opportunities in Asia 2 BC strengths and opportunities 3 4 Lessons from other cities and countries McKinsey & Company | 2
Five mega-trends reshaping the global economy The great rebalancing The productivity imperative The global grid Pricing the planet The market state McKinsey & Company | 3
Massive urbanization is underway—old Shanghai McKinsey & Company | 4 SOURCE: skylander.net
Massive urbanization is underway—new Shanghai McKinsey & Company | 5
Unprecedented infrastructure development is anticipated over next two decades Huge city Huge city More big cities More big cities population population Over 200 cities Over 200 cities 350 million 350 million with population with population additional additional over 1 million; over 1 million; people; more people; more New large- New large- currently only 35 currently only 35 than entire US than entire US scale railways scale railways in Europe in Europe population population As many as 170 As many as 170 large-scale large-scale railway systems; railway systems; Thousands Thousands currently only 70 currently only 70 of skyscrapers of skyscrapers in Europe in Europe As many as As many as 50,000; 50,000; equivalent to equivalent to building 10 New building 10 New York cities York cities McKinsey & Company | 6 SOURCE: OECD Development Center; McKinsey Global Institute analysis; United Nations; McKinsey Global Institute
3 billion new middle class consumers by 2030 Global middle class Billions of people 4.88 3.25 3 billion Sub-Saharan Africa 1.85 Middle East and North Africa 3.23 Central and South America North America 1.74 Europe Asia-Pacific 0.53 2009 2020 2030 McKinsey & Company | 7 McKinsey & Company |
Incomes are rising in developing economies faster, and at a greater scale, than at any previous point in history Population at start Years to double GDP per capita of growth period Million Country Year 1700 1800 1900 2000 9 154 United Kingdom 53 10 United States 65 28 Germany 33 48 Japan 27 South Korea 10 1,023 China 12 840 India 16 SOURCE: Angus Maddison; University of Groningen; Resource Revolution: Meeting the world’s energy, materials, food, McKinsey & Company | 8 and water needs, McKinsey Global Institute, 2011
440 cities in emerging markets will fuel nearly half Emerging 440 (440 largest cities in emerging markets) of the growth in global GDP through 2025 Percent contribution to global GDP growth, 2010–2025 100% = $50.2 trillion 100 47% 440 largest 26 = emerging of global market cities growth 27 313 cities in Asia 3 4 6 28 2 3 China South Asia Southeast Latin Middle East Eastern Other Developed Global region Asia America & Africa Europe & emerging countries growth Central Asia regions Asian cities In China, 15-20 MM people move to a city each year – equal to adding New York City twice McKinsey & Company | 9 SOURCE: McKinsey Global Institute Cityscope 2.0
Emerging market cities will become the leading consumer Emerging xx xx Advanced markets globally 2025 Elderly, higher- Young entry-level Laundry care Municipal water Rank income consumers consumers products demand 1 Shanghai Lagos São Paulo Mumbai 2 Beijing Dar es Salaam Beijing Delhi 3 Tokyo Dhaka Rio de Janeiro Shanghai 4 Tianjin Ouagadougou Shanghai Guangzhou 5 Mumbai Khartoum Mexico City Beijing 6 São Paulo Ghaziabad Moscow Buenos Aires 7 Osaka Sanaa Bangkok Kolkata 8 Chongqing Nairobi Istanbul Khartoum 9 Delhi Luanda Manila Dhaka 10 Nanjing Baghdad Johannesburg Istanbul 11 Dallas Guangzhou Kampala Belo Horizonte 12 New York Ibadan Porto Alegre Pune 13 Las Vegas Seoul Lusaka Buenos Aires 14 Hong Kong Kinshasa Tianjin Karachi 15 Wuhan Kano Tehran São Paulo McKinsey & Company | 10 SOURCE: McKinsey Global Institute
Impact from other Disruptive technology will have enormous Range of sized potential potential applications economic impacts economic impact by 2025 (not sized) Low High X–Y $ trillion, annual Mobile Internet 3.7–10.8 Automation of 5.2–6.7 knowledge work Internet of Things 2.7–6.2 Cloud technology 1.7–6.2 Advanced robotics 1.7–4.5 Autonomous and near- 0.2–1.9 autonomous vehicles Next-generation 0.7–1.6 genomics Energy storage 0.1–0.6 3D printing 0.2–0.6 Advanced materials 0.2–0.5 Advanced oil and gas 0.1–0.5 exploration and recovery Renewable energy 0.2–0.3 McKinsey & Company | 11 SOURCE: McKinsey Global Institute analysis
A small number of technologies will have disproportionate impact High impact technologies Media attention Number of relevant articles in major general interest and business publications over 1 year (log scale) 100,000 Mobile Internet Renewable Advanced oil and Autonomous 10,000 energy gas exploration and near- and recovery autonomous Cloud vehicles technology Energy Internet of storage Advanced Next- 1,000 Things robotics generation 3D Advanced genomics printing Automation of materials knowledge work 100 100 1,000 10,000 Potential economic impact across sized applications $ billion (log scale) McKinsey & Company | 12 SOURCE: Factiva; McKinsey Global Institute analysis
Amount of data is exploding in all sectors globally More data transmitted online in 2010, than all previous years Mobile data traffic doubled in 2012 15 out of 17 U.S. sectors have more data More information created per company than the than from 0 AD-2003 U.S. Library of Congress 2 M searches 1 M transactions 4 B page views 220 B photos every minute every hour every day stored McKinsey & Company | 13 13
Purchase decisions and sales are increasingly being made online – in both Western markets and in Asia Online-related retail sales Percent of total retail sales 10% 10% 9% 8% 7% 6% Online 6% 36% 34% 33% 33% 25% Offline 20% influenced 16% by online 2006 2007 2008 2009 2010 2011 2011 United States Shanghai McKinsey & Company | 14 14
People will need to work longer, retire later, and engage in lifelong learning Emerging markets 2050 3 working adults support 1 retiree 2020 7 working adults support 1 retiree 2000 10 working adults support 1 retiree McKinsey & Company | 15
We will also face a global shortage of skilled workers and a surplus of low-skilled workers Global balance of workers, 2020E Million workers 94 -41 -45 High-skill Medium-skill Low-skill McKinsey & Company | 16
The continuing rise of emerging markets will further strain global resources to an unprecedented level Water Energy Food ~40% gap between Increasing gap between 10,000 years of supply and demand by demand and supply of historical food 2030 fossil fuels; e.g., by 2030 production that ▪ 25% gap for oil must be matched ▪ 30% gap for gas in the next 50 years McKinsey & Company | 17
Risks associated with pursuit of growth opportunities Volatility – growth will not be a straight line (there will be asset bubbles) Rising income inequality plus technology Resource scarcity Interregional conflict Healthcare challenges – pandemics Education does not keep pace with urbanization McKinsey & Company | 18
The lifespan for companies is decreasing Estimated lifespan of S&P 500 companies, years 90 45 30 22 18 1935 1955 1975 1995 2011 McKinsey & Company | 19
Overview 1 Five global trends 2 Opportunities in Asia BC strengths and opportunities 3 4 Lessons from other cities and countries McKinsey & Company | 20
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