Atlas Magazine December 2004

Heading towards a new division of labour?

The annual report on worldwide investment, elaborated by the United Nations Commission for Commerce and Development (UNCCD), is regarded as a key tool to gauge the health of the world economy and to lay out its evolution trends.

Published last September and entitled «The Shift Towards Services», the 2004 edition's conclusions sounded more like a verdict: «the worldwide transfer of production activity is going to bring about a new international division of labor, similar to the redistribution of industrial production during the 1970s and 1980s».

The United Nations Agency expects the current trend to pave the way, and very soon, for a «new era marked by an avalanche of offshore processing that will hinge upon all sectors of activities». Given the scale of the phenomenon, UNCCD warns that «it would be foolish and unwise to adopt measures aiming at keeping service jobs in the original countries at all costs». For seeking to hamper outsourcing would be vain as well as harmful to corporate productivity and competitiveness.

The analysis is equally worrisome for rich countries states whose power of intervention in corporate life has shrunk, it can only confirm an already-established situation. With the globalization of share-holding and the predominant role of financial markets, corporate business is now the sole master of the economic scene, and of its policy.

Within this framework of global upheaval, the question that is on everyone's mind is : who is going to take full advantage of this new order?

While UNCCD deems the trend beneficial to both sides, that is the sender countries and the host ones, it remains plainly obvious that among the latter, India and China are the best positioned in the current race. Apart from their infrastructure, their know-how, their low-cost labor and their economy's growth rate, these giants are endowed with a major asset to their credit: the huge local market.

In the Middle East, Bahrain and Dubai's stock markets invest a great deal to enter this business and get hold of the leadership of outsourcing in the region.

As to Africa, it looks like the weaker side and the big loser of this new order. It is true that serious attempts have been made to attract foreign investors to Tunisia, Morocco, the Mauritius and Senegal where a relative success has been achieved.

On a large scale, though, the African continent remains unappealing. In the insurance sector, which is a good indicator of economic activity, we have already noticed that the big insurers are sneaking out of the African markets regarded to be unrewarding.

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