Globalisation and its enemies

Special corporate statement
Page 8 

Left to right: William Webster, Richard Burt

If the 1990s will be remembered for the rapid spread of new technology and free-market ideas, the first decade of the 21st century will be viewed as a period in which the seemingly inevitable process of economic globalisation faltered. 

A number of events – the emergence of terrorist groups with global reach, the wrenching problems of introducing economic reforms in emerging markets such as Argentina, and the massive attention paid in more developed economies to Enron-type corporate governance failures – all seemed to come together in a way that spelled the end of rapid growth and worldwide market liberalisation.

For many media observers, the symbol of the international economy in the 1990s was the annual business conference in Davos, Switzerland, where thousands of corporate executives and politicians gathered from around the world to network. Today, however, this symbol has been replaced by a rag-tag coalition of protestors, ranging from trade unionists to environmental activists, who regularly disrupt annual meetings of the WTO or the IMF.

But beyond this media-fed conclusion lies a more complex reality: the process of globalisation is still under way, but in a different manner. A decade ago, the major companies in the OECD world – the engines behind globalisation – took the spread of international trade and investment for granted. Today, this is not the case. Indeed, in a recent survey conducted with a group of our key clients, we found that the problem is not that globalisation no longer holds important business opportunities. Rather, it is that in order to capture these opportunities, companies must become far more sophisticated about how to operate in a more open, but also more risky environment.

The clients we surveyed do business in a range of areas, including the natural resources sector, financial services, high technology and consumer products. They all agreed that in doing business in challenging markets, reliable information was at a higher premium than ever before. They reported that despite all the media attention focused on global terrorism and regional crises in trouble spots, such as the Middle East, they are more preoccupied with mastering a narrower range of business risks. In particular, six key risk areas were highlighted:

    • Local corruption in business and government. This has emerged as a primary concern of our clients in the US and Western Europe, particularly in working in emerging markets. The ranges are from petty corruption, endemic in India and other south Asian markets, to more organised and dangerous criminal groups in countries such as the Ukraine.

    • Lack of transparency in accounting and banking practices and standards. Many countries have failed to adopt either US or international accounting standards, which creates real difficulties for foreign investors to reliably measure financial performance. “The lack of transparency is one of the single biggest impediments to doing cross-border deals,” a senior investment bank manager told us.

    • Bias in local government regulations. In many markets, regulatory rules are not consistently enforced or conveniently bent as a result of political pressure. The operations of central banks are also at times politicised, which can severely complicate financial transactions.

    • Predatory business practices by competitors. Many clients complained of the lack of a ‘level playing field’ in various markets, as a result of unfair behaviour by competitors, both foreign and local. Bribery was the most visible manifestation of such practices.

    • The danger of picking the ‘wrong’ partner. While clients told us they recognise the strategic importance of entering high-potential markets, such as China, they are deterred by questions concerning possible local partners. Standard, Western-style due-diligence techniques are often inadequate in the face of complicated offshore financial structures, or the origins of funds murky. Partner selection can result in reputational damage. The general counsel of a client in the energy industry noted: “We learned our lesson after rushing into a joint venture without properly reviewing our business partner. We now have a very thorough process for evaluating individuals and companies”.

    • Physical security threats. After 9-11, companies are highly sensitive to the risks of terrorism and related forms of political violence. This is true for ‘traditional’ problems, such as in southern Russia, Columbia, Pakistan and parts of south-east Asia, but our clients now also express concern about central Asia, northern Africa and, of course, the Middle East.

    All in all, our clients recognise that a combination of factors – the growth of terrorism, the Argentine crisis and even the Enron affair – have come together to complicate the globalisation process. At the same time, their appetite for international expansion has not diminished. They also recognise, as we do, that companies can succeed in challenging markets if they have the information they need to fashion prudent and effective strategies. Hard-to-get information will be a key factor for success in the new, more risky international business environment, and this is precisely what companies like Diligence LLC are committed to delivering.

    Top 10 Globalisation Issues List

    Issue Rank
    Corruption within business and government sectors 1
    Local accounting and banking practices 2
    Effectiveness and fairness of local government regulations 3
    Behaviour and business practices of competitors operating in the region, ie. is there a level playing field? 4
    The credibility and/or transparency of a potential local partner or local investor 5
    Local crime concerns and general security of the environment 6
    Possible influence of local organised crime 7
    Local labour issues, including stability, availability of necessary skills within local labour force etc. 8
    Currency stability 9
    Quality of existing infrastructure, ie. transportation, power, water 10
    Source: Diligence LLC © Globalisation Survey April 2002

    * Richard Burt, a former assistant secretary of state and US ambassador, is the chairman of Diligence LLC. William Webster, the former director of the FBI and the CIA, chairs the firm’s Senior Advisory Group.

    Visit Diligence LLC at:

    Economic data

    GDP growth: +0.6% Q1 2019 year-on-year
    Consumer price inflation: 2.3% May 2019 annual
    Trade: +0.4% exp, -1.2% imp, Q1 2019
    Unemployment: 5.2% July 2019
    Last update: 8 July 2019

    OECD Observer Newsletter

    Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

    Twitter feed

    Subscribe now

    <b>Subscribe now!</b>

    To order your own paper editions,email

    Online edition
    Previous editions

    Don't miss

    • MCM logo
    • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
    • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
    • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
    • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
    • The new OECD Observer Crossword, with Myles Mellor. Try it online!
    • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
    • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
    • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
    • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
    • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
    • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
    • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
    • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
    • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
    • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
    • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

    Most Popular Articles

    OECD Insights Blog

    NOTE: All signed articles in the OECD Observer express the opinions of the authors
    and do not necessarily represent the official views of OECD member countries.

    All rights reserved. OECD 2019