Capital Markets

DEMAND GRAVITATING TOWARDS THE EAST

The world’s centre of gravity has tipped eastward and south-south, in favour of markets with strong annual growth, younger demographics, more foreign reserves, and lower debt to GDP ratios than markets in the Western Hemisphere. Traditional perspectives, with the West at its heart, need to be adapted. Despite political instability and a slowing global economy, growth across the Afro-Eurasian regions continues to be driven by key factors as hydrocarbon- and natural resources related inflows; monetisation of a young, large labor force; and Foreign Direct Investment (FDI). A new economic reality is taking shape in these markets. Global energy and commodity demand is projected to rise by 45 per cent between until 2030. The International Energy Agency expects world oil demand to rise to 116 million in 2030. This shall increase the already fierce competition for energy resources and other commodities. In 2008, 70 per cent of Middle Eastern oil was exported to the Asia-Pacific, while only 30 per cent came to the Western Hemisphere, the latter relying on surpluses of Russia and Central Asia. By 2030 the Asia-Pacific region’s oil deficit shall be 7 times that of the West, and most of this growth in demand will pass through the Indian Ocean. Whereas Russia, together with China, India, and Indonesia, dominates Asian mining, India stands geographically at the commanding centre of the Indian Ocean. Australia, one of the world’s largest commodity exporters, has directed its commodity exchange towards Asia, notably China and Japan, a significant shift away from Australia’s historically European-based trading partners.